FICO Score getting killed - I am obviously doing this wrong [FICO and Utilization]
Aug 27, 2014, 10:47 am
#167
Join Date: Jul 2013
Posts: 227
Got a question for the gurus. Skip the next paragraph if reasoning for a BT is not of interest.
Had an unexpected medical bill come up. I had to take my wife to the ER a month or so back, due to excruciating lower abdominal pain at 1AM. She is not a complainer, but this was so bad, it couldn't wait until morning. It came out of seemingly nowhere, and as much as I try to avoid the ER, this was the only good choice. We're newly married, mid 20s, and very healthy. I work for a small company, so my insurance plan options are limited. We hadn't touched our deductible for the year. The good news is, it wasn't anything extremely serious, and a regimen of antibiotics and rest brought her back to new. The bad news is, the ER ran labs and a CT scan, and billed out over $15K. After our insurance cut that in half, and then the deductible + 10% coinsurance was applied, we got hit with a hospital bill of a couple thousand dollars.
So, I never carry balances, but I'm tempted to BT this payment, since I have the option. I can pay it out of emergency savings, but I'm trying to weigh what the best option is. I have:
15-month, 0% APR, 1% BT Fee on a Chase card, but this would put the card to 65% utilization ~($33 fee)
9-month, 0% APR, 3% BT Fee on a Citi card, and this would put the card to a 25% utilization ~($100 fee)
Either way, I can pay it off over the next 6 months easily. I suppose this would be considered an "emergency" worthy of pulling some funds from the emergency account. Is 65% utilization on one card that bad? I've never had a statement close with anything over 50%. Perhaps worth paying a portion of the bill and BT the rest, keeping utilization down?
These are new waters for me, so I appreciate any guidance. I'm essentially debating paying the BT fee in exchange for the peace of mind that comes with maintaining $xx balance in my emergency fund. That may be a foolish premise, right there.
Had an unexpected medical bill come up. I had to take my wife to the ER a month or so back, due to excruciating lower abdominal pain at 1AM. She is not a complainer, but this was so bad, it couldn't wait until morning. It came out of seemingly nowhere, and as much as I try to avoid the ER, this was the only good choice. We're newly married, mid 20s, and very healthy. I work for a small company, so my insurance plan options are limited. We hadn't touched our deductible for the year. The good news is, it wasn't anything extremely serious, and a regimen of antibiotics and rest brought her back to new. The bad news is, the ER ran labs and a CT scan, and billed out over $15K. After our insurance cut that in half, and then the deductible + 10% coinsurance was applied, we got hit with a hospital bill of a couple thousand dollars.
So, I never carry balances, but I'm tempted to BT this payment, since I have the option. I can pay it out of emergency savings, but I'm trying to weigh what the best option is. I have:
15-month, 0% APR, 1% BT Fee on a Chase card, but this would put the card to 65% utilization ~($33 fee)
9-month, 0% APR, 3% BT Fee on a Citi card, and this would put the card to a 25% utilization ~($100 fee)
Either way, I can pay it off over the next 6 months easily. I suppose this would be considered an "emergency" worthy of pulling some funds from the emergency account. Is 65% utilization on one card that bad? I've never had a statement close with anything over 50%. Perhaps worth paying a portion of the bill and BT the rest, keeping utilization down?
These are new waters for me, so I appreciate any guidance. I'm essentially debating paying the BT fee in exchange for the peace of mind that comes with maintaining $xx balance in my emergency fund. That may be a foolish premise, right there.
Paying your bill and avoiding interest charges is much more important than worrying about the MS impact of carrying a balance for a little while.
Dunno if the Chase Slate would work for you, but it's reputed to be a really sweet BT product.
You can of course "Ponzi" it to yourself... which just simply delays the need to pay, by paying it off via other incurred debt.
In other words: buy GC products using a points earning product.
Use / liquidate GC products and use those cash funds to pay the balance for your medical bills. You will basically get a 30-60 day interest-free grace period on your new purchases.. rinse and repeat next month and so forth.
Don't fool yourself though, ultimately you DO have to pay it off. But this gives you a way to earn points and avoid interest charges. You're trading a simple, easy BT fee for GC product fees and the stresses of liquidation, and managing due dates, etc. Since you have an emergency fund (good job!) you could pay $1000 a month over time, instead of a huge hit at once.
Until it's paid off in full, forget about worrying over your utilization. It will rebound in short order once you clear the *real* debt. However, if you do this right, (offset statement closing dates) you can pay bill "A" before it posts by charging to card "B". Then the following month pay off "B" before it posts by charging again to "A"... etc. Thus masking your debt and making your utilization look close to zero.
Aug 27, 2014, 11:10 am
#168
Join Date: Feb 2012
Location: LAX
Programs: AA, TY, UR, UA, US, WN, MR, SPG
Posts: 1,453
Paying your bill and avoiding interest charges is much more important than worrying about the MS impact of carrying a balance for a little while.
Dunno if the Chase Slate would work for you, but it's reputed to be a really sweet BT product.
You can of course "Ponzi" it to yourself... which just simply delays the need to pay, by paying it off via other incurred debt.
In other words: buy GC products using a points earning product.
Use / liquidate GC products and use those cash funds to pay the balance for your medical bills. You will basically get a 30-60 day interest-free grace period on your new purchases.. rinse and repeat next month and so forth.
Don't fool yourself though, ultimately you DO have to pay it off. But this gives you a way to earn points and avoid interest charges. You're trading a simple, easy BT fee for GC product fees and the stresses of liquidation, and managing due dates, etc. Since you have an emergency fund (good job!) you could pay $1000 a month over time, instead of a huge hit at once.
Until it's paid off in full, forget about worrying over your utilization. It will rebound in short order once you clear the *real* debt. However, if you do this right, (offset statement closing dates) you can pay bill "A" before it posts by charging to card "B". Then the following month pay off "B" before it posts by charging again to "A"... etc. Thus masking your debt and making your utilization look close to zero.
Dunno if the Chase Slate would work for you, but it's reputed to be a really sweet BT product.
You can of course "Ponzi" it to yourself... which just simply delays the need to pay, by paying it off via other incurred debt.
In other words: buy GC products using a points earning product.
Use / liquidate GC products and use those cash funds to pay the balance for your medical bills. You will basically get a 30-60 day interest-free grace period on your new purchases.. rinse and repeat next month and so forth.
Don't fool yourself though, ultimately you DO have to pay it off. But this gives you a way to earn points and avoid interest charges. You're trading a simple, easy BT fee for GC product fees and the stresses of liquidation, and managing due dates, etc. Since you have an emergency fund (good job!) you could pay $1000 a month over time, instead of a huge hit at once.
Until it's paid off in full, forget about worrying over your utilization. It will rebound in short order once you clear the *real* debt. However, if you do this right, (offset statement closing dates) you can pay bill "A" before it posts by charging to card "B". Then the following month pay off "B" before it posts by charging again to "A"... etc. Thus masking your debt and making your utilization look close to zero.
Another option I may have is to simply pay it over time, straight to the Hospital. They probably would be fine with a pay-over-time arrangement without extra fees. I'm sure their A/R has to be ginormous, and if they're getting $600/mo on a bill, they probably won't complain. Probably worth looking into.
Aug 27, 2014, 11:25 am
#169
Join Date: Sep 2010
Posts: 28
a little interest is not a bad thing. that is what responsible credit card use is for... if an emergency occurs, you have a bit of a cushion.
As you said, it's $40+ of interest... hardly anything if we're being honest. You can offset that with a bank account signup if you really need the $40.
Getting the hard pull, as you mentioned, is not worth it. Though everyone tries to scare people off paying interest, it's because we've seen people charge themselves stupid with points cards because they think it's "all good" because they're getting points. That's when it gets dangerous... a couple thousand on a lower interest credit card paid off over 6 months is nothing to worry about and probably won't impact your credit score much, if at all, if you have high enough credit lines.
As you said, it's $40+ of interest... hardly anything if we're being honest. You can offset that with a bank account signup if you really need the $40.
Getting the hard pull, as you mentioned, is not worth it. Though everyone tries to scare people off paying interest, it's because we've seen people charge themselves stupid with points cards because they think it's "all good" because they're getting points. That's when it gets dangerous... a couple thousand on a lower interest credit card paid off over 6 months is nothing to worry about and probably won't impact your credit score much, if at all, if you have high enough credit lines.
Aug 27, 2014, 11:41 am
#170
Join Date: Feb 2012
Location: LAX
Programs: AA, TY, UR, UA, US, WN, MR, SPG
Posts: 1,453
I'm not sure how much specific card utilization plays into the credit score, or if it's really primarily overall utilization. If the latter is the case, then there's no issue whatsoever.
Aug 27, 2014, 11:09 pm
#171
Moderator: Chase Ultimate Rewards
Join Date: Apr 2005
Location: SFO
Programs: UA 2P, MR LT Plat, IHG Plat, BW Dia, HH Au, Avis PC
Posts: 5,454
(I recall some discussion on there being an increase in effect when the utilization hits 50% and above. But if your overall utilization is so low, there probably wouldn't be much of an impact anyway.)
Aug 28, 2014, 9:07 am
#172
Join Date: Feb 2012
Location: LAX
Programs: AA, TY, UR, UA, US, WN, MR, SPG
Posts: 1,453
What about bringing that card to ~45% utilization and paying the rest in cash/other card?
(I recall some discussion on there being an increase in effect when the utilization hits 50% and above. But if your overall utilization is so low, there probably wouldn't be much of an impact anyway.)
(I recall some discussion on there being an increase in effect when the utilization hits 50% and above. But if your overall utilization is so low, there probably wouldn't be much of an impact anyway.)
Thanks for all the input, everyone.
Aug 28, 2014, 9:36 am
#173
Join Date: Nov 2013
Location: SLC
Posts: 97
What about bringing that card to ~45% utilization and paying the rest in cash/other card?
(I recall some discussion on there being an increase in effect when the utilization hits 50% and above. But if your overall utilization is so low, there probably wouldn't be much of an impact anyway.)
(I recall some discussion on there being an increase in effect when the utilization hits 50% and above. But if your overall utilization is so low, there probably wouldn't be much of an impact anyway.)
In May I ended up using a Chase Slate BT check with a 2% fee. Put that card at ~68% utilization, but my overall utilization is still less than 10%.
Per CreditKarma my score went down 14 points (780 down to 766). It has since bumped back up to 768.
When I did this two years ago (with a card utilization over 60%), my score went down 13 points and stayed mostly flat at the lower level, and then shot up 20 points when I paid off that balance (which was still over 50% card utilization).
Aug 30, 2014, 1:04 am
#174
Suspended
Join Date: Dec 2013
Posts: 632
Question for the report guru's - my EX score is in the crapper (low 700's) at the moment because I ran a balance through statement close on a few cards a few months back and they were reported to the bureaus. Since paid off obviously, but for some reason, they never seem to update and the pictures of my score show them still carrying utilization. Any way to get the credit card companies to update their info with the bureaus? Amex seems to be particularly bad at this according to my reporting sources. One of them had no updated info from Amex since May.
Aug 31, 2014, 5:39 pm
#175
Join Date: Dec 2003
Location: Brooklyn, NY, United States
Programs: AA, BA, UA, Spirit, Delta, PC Plat, SPG Gold, HHonors Diamond, Club Carlson Gold, Marriott Gold
Posts: 1,735
a little interest is not a bad thing. that is what responsible credit card use is for... if an emergency occurs, you have a bit of a cushion.
As you said, it's $40+ of interest... hardly anything if we're being honest. You can offset that with a bank account signup if you really need the $40.
As you said, it's $40+ of interest... hardly anything if we're being honest. You can offset that with a bank account signup if you really need the $40.
Oct 5, 2014, 3:56 pm
#176
Join Date: Oct 2014
Posts: 4
Newbie question on Credit Lines and use
I'm not sure where to ask this so I am going to post it here.
I have read and understand some of the credit line practices and usage ratio but not entirely sure about one thing.
I know exceeding or having a high usage of the credit line is not good as it tells banks and others you are a high risk.
But I'm not sure how the % of use is based on. Is the amount of credit used based on the single credit card I'm using to make the purchase or is the it based on the entire credit line of all the cards within that bank.
Ex. I have credit line of $4000 with a Chase United personal card and $10,000 with a Chase United Business card and another $10,000 credit line Chase Freedom card.
Now if I make a purchase of $3000 with my Chase United Personal card (only having $4000 limit ) then this will be 75% of credit use ratio based on this one card.
But since I actually have over $24,000 credit line with Chase but spread over 3 cards does it mean the usage ratio drops as its only $3000 out of $24,000?
Or even going further on that last thought. Is the actual credit use ratio spread out over ALL my existing card which would add up to over $100,000 in credit limits. So it would be $3000 out of $100,000
Sorry as I'm still new to this and cant get the handle on what the correct answer is and dont want to make mistakes and ruin my credit . Thanks
I have read and understand some of the credit line practices and usage ratio but not entirely sure about one thing.
I know exceeding or having a high usage of the credit line is not good as it tells banks and others you are a high risk.
But I'm not sure how the % of use is based on. Is the amount of credit used based on the single credit card I'm using to make the purchase or is the it based on the entire credit line of all the cards within that bank.
Ex. I have credit line of $4000 with a Chase United personal card and $10,000 with a Chase United Business card and another $10,000 credit line Chase Freedom card.
Now if I make a purchase of $3000 with my Chase United Personal card (only having $4000 limit ) then this will be 75% of credit use ratio based on this one card.
But since I actually have over $24,000 credit line with Chase but spread over 3 cards does it mean the usage ratio drops as its only $3000 out of $24,000?
Or even going further on that last thought. Is the actual credit use ratio spread out over ALL my existing card which would add up to over $100,000 in credit limits. So it would be $3000 out of $100,000
Sorry as I'm still new to this and cant get the handle on what the correct answer is and dont want to make mistakes and ruin my credit . Thanks
Oct 5, 2014, 10:34 pm
#177
Join Date: Dec 2003
Location: Brooklyn, NY, United States
Programs: AA, BA, UA, Spirit, Delta, PC Plat, SPG Gold, HHonors Diamond, Club Carlson Gold, Marriott Gold
Posts: 1,735
You need to watch your Utilization Rate (debt to credit ratio) for both individual credit card and across all your revolving accounts, as it is a major FICO component.
Having said that, even if you max out one of your credit card, I wouldn't worry about it if you repay it promptly. If you want to be super-vigilant, pay off your CC balance immediately after your statement is cut and not by the due date, and the [most] banks will report it to the bureaus. I've never felt the need to worry about that (unless right before the app-o-Rama), because the damage is very short-lived.
Having said that, even if you max out one of your credit card, I wouldn't worry about it if you repay it promptly. If you want to be super-vigilant, pay off your CC balance immediately after your statement is cut and not by the due date, and the [most] banks will report it to the bureaus. I've never felt the need to worry about that (unless right before the app-o-Rama), because the damage is very short-lived.
Oct 6, 2014, 8:23 am
#178
Moderator: Chase Ultimate Rewards
Join Date: Apr 2005
Location: SFO
Programs: UA 2P, MR LT Plat, IHG Plat, BW Dia, HH Au, Avis PC
Posts: 5,454
Your question has been merged with a long-running thread on utilization and credit scores. Please review the material here and post follow-up questions in this thread. Thank you.
Oct 8, 2014, 1:12 am
#179
Suspended
Join Date: Nov 2010
Posts: 1,677
Question for the report guru's - my EX score is in the crapper (low 700's) at the moment because I ran a balance through statement close on a few cards a few months back and they were reported to the bureaus. Since paid off obviously, but for some reason, they never seem to update and the pictures of my score show them still carrying utilization. Any way to get the credit card companies to update their info with the bureaus? Amex seems to be particularly bad at this according to my reporting sources. One of them had no updated info from Amex since May.
Oct 9, 2014, 4:44 am
#180
Join Date: Apr 2011
Location: Naples, Florida
Programs: AA Lifetime Gold, Hyatt Platinum,Marriott Silver,Hilton Honors Gold
Posts: 593
Does anyone know if personal card "charge card" balances like the American Express Premier Gold charge card are figured into your utilization ?
I put a lot of business expeses on mine and am trying to figure out if I should rush to pay off the balances each month by closing of statement OR if I can just take the normal time and pay when Amex shows due ?
Worldspan
Naples, Florida
I put a lot of business expeses on mine and am trying to figure out if I should rush to pay off the balances each month by closing of statement OR if I can just take the normal time and pay when Amex shows due ?
Worldspan
Naples, Florida