Utilization

[velo90]

Hi everyone,

My overall credit card utiliztion is at about 30% spread out amongst a few cards.  I was curious about using a 0% balance transfer to consolidate balances onto one card.  My question is, if I transfer a balance from one card to another, my overall utilization won't change but the one credit card will be at nearly 90% utilization.  Will this have a negatie impact on my score?

Thanks in advance for all the help.

Eric

[Appleman]

Yes, my opinion is that it will have a negative effect on your score.

Any card that is 90% or more utilized will be considered MAXXED by the scoring systems.

That being said, it may be a good financial move if you got to 85% utilization with a low interest offer if you are going to save a lot of money.

[velo90]

Thanks for the input.  Financially, it definitely makes sense but I'm looking to manage the impact reporting-wise.

[SouthJamaica]

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@velo90 wrote:

Hi everyone,

My overall credit card utiliztion is at about 30% spread out amongst a few cards.  I was curious about using a 0% balance transfer to consolidate balances onto one card.  My question is, if I transfer a balance from one card to another, my overall utilization won't change but the one credit card will be at nearly 90% utilization.  Will this have a negatie impact on my score?

Thanks in advance for all the help.

Eric

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Absolutely. Even an over 30% utilization of a single card has negative effects. 90% is considered 'maxed out' and would have a very negative effect on your scores.

[SouthJamaica]

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@velo90 wrote:

Thanks for the input.  Financially, it definitely makes sense but I'm looking to manage the impact reporting-wise.

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Yes one needs to prioritize in these situations... saving money vs having a good score.

FICO doesn't give you points for saving money

[Anonymous]

Well there's no question that it will hurt your score in the short term.  There are three CC-related factors that affect your score:

(a) Total utilization (counting all CCs together)

(b) Individual CC utilization (considering each card by itself)

(c) Number of cards showing a positive balance

(A) begins to have a negative impact even when the % is low, e.g. at 10%.

(B) doesn't matter until it gets much higher.  My opinion is that there is unlikely to be any real effect for most people until they hit 50%.  And even then the impact doesn't become serious until it is very high.  90% is serious.

Note that your plan will involve a hit from (b) and a bonus from (c).  (You will be creating several $0 balances.)  The harm from B should be larger than the help from C initially, no question.  But as you pay it down, the benefit from C will at some point become greater.

As a side note, have you confirmed that there are also no BT fees?  That's different from not being charged interest once the money is on the 0% card.

[Anonymous]

Have you considered a personal loan with an installment plan? I only ask because I use was funded with a SoFi loan and am loving it. You can see if you prequalify with a SP, if you are interested. There are other options, too. 

The main thing is to get a plan that works for you and stick to it. Even though my Chapter 13 was in 2008 I still keep a very tight budget and know where every penny of my money goes. It really makes a difference when facing bills. If you have no immediate plans involving credit checks, perhaps you may want to go ahead and do what you asked about. Definitely your call. 

Best of luck to you.

[velo90]

It's about $5k which I can either pay off quickly and sacrifice the savings or pay off over several months on a low interest rate (3% for the period because of BT fee).  I could put it on my HELOC which is 2.99% so that would work out about the same but may not actually impact my score as much as it's moving from CC to HELOC.  Thoughts on that?

[velo90]

It's about $5k which I can either pay off quickly and sacrifice the savings or pay off over several months on a low interest rate (3% for the period given $100 BT fee).  I could put it on my HELOC which is 2.99% so that would work out about the same but may not actually impact my score as much as it's moving from CC to HELOC.  Thoughts on that?

[StartingOver10]

How does your HELOC show on your credit report?  Installment loan? 

Why not take advantage of that option?