Score benefit in shifting balances in order to lower the util on certain cards?

[Anonymous]

I just got approved for a $17K card from Navy Fed. (Go Navy!) I have a balance transfer option and am thinking of shifting a small amount of two balances on some closed cards that are high util. (About 78% on each of them right now.) Each month the util on these cards goes down about 1%-1.5%, as I pay a fixed amount. The interest on these two cards is VERY low—I think about 2-3%, so I can't really beat that in the long run. 

The Navy Fed card has 0% interest for a year. I was thinking of shifting a smallish amount from these two closed cards to sort of "take the edge off" the high util on those closed cards. They'll still be high (probably low 70s) but in a few months would dip below 70% which I think "looks" better. 

Would there be any FICO benefit to doing this? Should I just not bother and keep the balances where they are? 

Data points: 650-660 FICO. Low income (25K). 90-day-late is a year old. Average age of accounts 7 or so years. Oldest account 20+ years. Overall util will be about 39-40% when my new cards and CLIs post. 

BTW, when my overall util dipped below 69% recently, there was no increase in score whatsoever. I guess the inquiry and new account I had (which helped the util be lower) offset the benefit of the lowering of util. Am I delusional to hope that I'll see a score increase when my overall util is under 39%?

[Anonymous]

You mentioned balances on closed cards being at 78% utilization.  From my understanding, having balances on closed cards results in those accounts being viewed as maxed out by the Fico algorithm, as there is debt (numerator) against no limit (denominator is zero).  If that's indeed the case, cutting those balances in half or even bringing them down to (say) $10 wouldn't improve your utilization on those specific cards, as they'd continue to be viewed as maxed out until taken down to $0 reported.  That being said, you could see a benefit from moving the balances over to your new card with the 0% offer, but only if you were to take those other cards down to $0.

I think it could be a good move.  You have a major delinquency from a year ago and having maxed out cards on top of that can really magnify your risk.  Curious to hear other opinions on the subject.

[Anonymous]

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@Anonymous wrote:

You mentioned balances on closed cards being at 78% utilization.  From my understanding, having balances on closed cards results in those accounts being viewed as maxed out by the Fico algorithm, as there is debt (numerator) against no limit (denominator is zero).  If that's indeed the case, cutting those balances in half or even bringing them down to (say) $10 wouldn't improve your utilization on those specific cards, as they'd continue to be viewed as maxed out until taken down to $0 reported.  That being said, you could see a benefit from moving the balances over to your new card with the 0% offer, but only if you were to take those other cards down to $0.

I think it could be a good move.  You have a major delinquency from a year ago and having maxed out cards on top of that can really magnify your risk.  Curious to hear other opinions on the subject.

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Thanks for your reply! It's been very helpful!

The original limits on the closed cards still seem to be a factor on my reports (they used to be at 100% util but now are at 78% util and my overall utilization is factoring in the original limits of the closed cards). But if there is no FICO scoring benefit from the lowering of util on closed cards, then I guess there's no point. I can't pay everything off in a year, unfortunately. I just want to transfer a smaller amount that I know I can pay off (on the Navy card) in a year, before the 0% interest offer expires.

I have a very high expectation of receiving a large amount of money in less than a year. It'll be enough to pay everything off and then some! But I can't count my chickens before they hatch and it's much "safer" to keep the balances on the closed cards (with the much lower interest) & pay them off when I have the cash. 

[Anonymous]

I agree, if they're closed i wouldn't bother with only a partial BT. I would however, try to BT those balances away from high interest rates. 

What are the balances and APR on those closed accounts?

TBH, I'm somewhat surprised that they approved a $17K CC being as you do have high utilization. In addition to the delinq.

[Anonymous]

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@Anonymous wrote:

I agree, if they're closed i wouldn't bother with only a partial BT. I would however, try to BT those balances away from high interest rates. 

What are the balances and APR on those closed accounts?

TBH, I'm somewhat surprised that they approved a $17K CC being as you do have high utilization. In addition to the delinq.

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Yeah, a partial BT is my only option. I am glad I asked you guys about it first! I won't be doing it.

The balances are a total of maybe $15K and the APR is about 2-3%. (I'm on a low-interest payment plan.) I can't beat that low APR and it's probably best to keep the debt where it is. I wouldn't want to transfer the entire balance over anyway, because that would pretty much max out the Navy card. 

I'm surprised that Navy gave me such a high limit, but Navy is Navy! LOL. I'm VERY grateful!

Edit: I think part of the reason Navy approved me is that despite the high util, my DTI is not bad (about 19%). Paying off the closed CCs is my primary debt obligation.

[Anonymous]

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@Anonymous wrote:

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The original limits on the closed cards still seem to be a factor on my reports (they used to be at 100% util but now are at 78% util and my overall utilization is factoring in the original limits of the closed cards).  

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It sounds like you may be looking at front-end summary software from a CMS.  While you may see utilization being lowered on those accounts, just realize that the Fico algorithm isn't "seeing" the same thing and is going to consider those accounts maxed out until they're paid off.

[Anonymous]

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@Anonymous wrote:

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It sounds like you may be looking at front-end summary software from a CMS.  While you may see utilization being lowered on those accounts, just realize that the Fico algorithm isn't "seeing" the same thing and is going to consider those accounts maxed out until they're paid off.

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Ah, I see! Well, that settles it. I'll just keep the balances where they are and keep paying them off. Thanks again!