Question for you folks who understand credit score stuff

Discussion in 'Community Discussion' started by GanChan, Feb 6, 2016.

  1. GanChan macrumors 6502a

    Jun 21, 2005
    My credit score would easily be 800+ if not for my credit utilization percentage, which is lousy enough to drag me down into the upper-mediocre zone. I'm trying to figure out the best way to fix this issue in a reasonable amount of time. I've begun the process of "snowballing," which will definitely get the job done but may take a few years to do it. But I've also wondered whether it would make sense to get a loan large enough to pay off all the credit cards at a comparable or better interest rate. As I see it....

    -Would instantly drop my credit utilization to 50 percent, even before I started paying it down. (Actually, if I shift the rotating credit debt to installment payment debt, it looks like I'll drop my CC utilization all the way to zero)
    -Zeroed-out credit cards would continue to work for me, but only for essential monthly bills which would be paid off in full each month, reinforcing good credit behavior to help overall score that much more
    -Would reduce the age of a big chunk of my overall debt (which is one of the strong points of my current score)
    -I'd have to cough up one big payment a month as opposed to several smaller ones
    -If the rate or terms change, it'll hurt more than a rate/term change on an individual CC balance

  2. rick snagwell macrumors 68040

    rick snagwell

    Feb 12, 2011
    oceanside, ca
    why not open two more credit cards getting maybe 20k more credit limit to your score...then just keep those at zero and work on the big boys
  3. ideal.dreams macrumors 68020


    Jul 19, 2010
    Another easy way to lower credit utilization is to simply request a credit line increase (CLI) with your creditors. If you are on good terms (i.e. never missed a payment, account is established and not recently new) then there should be no reason your request is declined. More credit = less utilization. Unless, of course, you decide to spend more and max out your utilization again anyways.
  4. freeskier93 macrumors 6502

    Jul 13, 2008
    That advice is about as good as holding an AA meeting at a bar on a Friday night.
  5. smallcoffee macrumors 65816

    Oct 15, 2014
    North America
    Well, right now you should stop worrying about your credit score and worry about paying off those credit cards. Literally burning money.
  6. Tomorrow macrumors 604


    Mar 2, 2008
    Always a day away
    Instead of a loan, get a balance transfer credit card, something like Chase Slate. That way, you're paying no interest on your old debt, and once you've paid it off, you have that much credit available PLUS the available credit from your new credit card (a loan doesn't afford you this additional credit).

    I'm not shilling for Chase (I don't have any of their cards), any card that allows balance transfers with no interest and no transfer fee should do the job.
  7. Queen of Spades macrumors 68030

    Queen of Spades

    May 9, 2008
    The Iron Throne
    What's your current score and what's your current utilization? What are your interest rates? The problem is, when you have really high utilization (80% or higher), most credit card companies will not approve you for more cards. They obviously see warning signs and it's really hard to get approved in that scenario (but that depends on your numbers). To a lesser extent, this also applies to loans - at least loans worth having.

    My suggestion without knowing your full details is to go for the snowball method until your scores are good enough to get a 0% balance transfer card (typically personal loans have fairly high APR, but it is dependent on your score - 0% would be better). Start with the highest APR and pay your way down. However, you need to make sure that whatever habits/behaviors got you into debt trouble have been ameliorated.
  8. Zenithal macrumors 603

    Sep 10, 2009
    Balance transfer to a card with a low APR that won't come into effect for say 24-36 months. I'd avoid closing an old card, because that will hurt your score. Asking for more credit line will lower your utilization rate over the cards too. I or my wife barely use 10% utilization over our cards. I think I've got close to 220K in credit limit through all my cards, though that's relevant to my income and banking history with a few banks. My house is paid off as well.

    My suggestion would be to dedicate as much income to paying off your bills as possible. Swallow your pride and live cheaply. My score is somewhere between 800-830. It's a showoff range, but it rarely sticks for a long time because as soon as you use credit, it'll drop. One could effectively have a temporary 850 score. Anything above 760 or so will get you prime rates.

    FWIW, I've always paid my balance in whole regardless of the card. When you pay off your loans, don't be stupid with your credit again.
  9. maflynn Moderator


    Staff Member

    May 3, 2009
    There's credit utilization which you're addressing, but there's also percentage of credit vs. income. So there is a risk of opening too many credit cards to lower that utilization. I'm not expert, but I think paying it down like you're doing is probably the best bet. Just be patient and work at it.
  10. nightcap965 macrumors 6502a


    Feb 11, 2004
    Cape Cod
    Also, be careful about taking out a secured loan to pay off unsecured loans. A second mortgage might come with a lovely interest rate, but if something bad happens you won't just get dunning calls, they'll take the roof over your head.

    There are really no good shortcuts.
  11. mac666er macrumors regular

    Feb 7, 2008
    San Francisco, CA
    Let's just say that I work in Finance.

    I have found out that if you answer truthfully why you are doing something, it is easier to find a suitable answer.

    With those two things in mind, I'll say that having a good credit score is good for mostly one thing: getting more credit. Sometimes it is also used for background checks, but I don't believe it to be that strong a component of an overall background check. i.e. I doubt that if you don't have an 800 score you won't land a job at a big company.

    If you want to get an 800+ for a premium credit card, then it is not really needed as much as a large annual income for example.

    But if you want the score to get a mortgage and then get an excellent rate, then that is a little bit more serious objective and when you apply, the amount of debt and how you have managed it over time and for how long would be more influential in getting a good loan.

    If you just want to pay off your debt as soon as possible and the cheapest way, then the credit score is not important at all. AT ALL.

    I am assuming your intentions lie somewhere among the options I outlined. If you want to ask for more credit later and pay off your debt sooner and cheaply, then I would recommend transfer a balance to a credit card and pay that as fast as you can.

    Getting a loan will lower your credit score at first and then rise it up later as you start paying. Every time you request a loan, your score takes a hit.

    If you get a secured loan (i.e. with a collateral, such as your house or a co-signer , like a parent) the rate will go down, you pay your debt and the score will go up eventually. But yeah, you are putting your collateral at risk for paying less. That's your choice to make.

    In my eyes, these are all tools. nobody frames an 800 score to put it in the living room.

    I wish you success in your financial objectives.
  12. nightcap965 macrumors 6502a


    Feb 11, 2004
    Cape Cod
    The fun thing about credit - banks love to extend it when you don't need it. I benefited from having a good score just about one year ago. It was the Monday of George Birthington's Washday weekend, and my faithful old car needed service. I brought it in, and when I learned what was going to be required, asked the service manager to introduce me to her favorite salesman.

    This was in the middle of some of the worst snows we've seen in these parts. No one was out buying cars. The lonely salesman jumped to help us. In very little time, we decided on a new model and sharpened our pencils. We negotiated a good trade-in for our old model (it helped that they had been providing regular service for this car for the past year and a half) and talked down the base price.

    I was ready to pay for the car in cash. But the manufacturer's website said they'd do 0% financing for five years (for "well-qualified" customers, of course). The dealership resisted a bit, but they get a bonus from the manufacturer if the car is financed through them, even at 0%. They confirmed that my credit was exemplary, and that was it.

    I made a nice hefty down-payment on a cash-back credit card and a couple days later, drove the new car home through the snow.

    Twenty years earlier, it took both me and the Unindicted Co-Conspirator co-signing to get a good rate from my credit union - my own credit simply wasn't good enough. Twenty years of never missing a payment later, of using credit cards only for convenience, paying them off in full each month, twenty years of automatic mortgage payments, and I've reached the point where my credit is about as good as it can get ... and I no longer need it.
  13. mobilehaathi macrumors G3


    Aug 19, 2008
    The Anthropocene
    I don't think it takes someone who "understands credit score stuff" to recognize that you're over spending. Playing games with credit granting organizations will likely just bite you in the ass.

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