Question about rebuilding after maxing out carrying balance

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canesfan
 
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Question about rebuilding after maxing out carrying balance

Postby canesfan » Thu Jun 25, 2015 11:04 am

I have two credit cards both with CapitalOne. One is a Quick Silver Cash Rewards with $500CL and the other is a Platinum Secured Card $1000CL. My FICO is 540 and I have both cards maxed out. My question is after I pay them both of in the next month should I send in additional money to raise the limit on the prepaid to help decrease my utilization or just pay them off and keep utilization under 10% and wait out the damage that having maxed out and gone over the CL on both cards has done to my FICO?


Revelate
 
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Re: Question about rebuilding after maxing out carrying balance

Postby Revelate » Thu Jun 25, 2015 12:03 pm

canesfan wrote:I have two credit cards both with CapitalOne. One is a Quick Silver Cash Rewards with $500CL and the other is a Platinum Secured Card $1000CL. My FICO is 540 and I have both cards maxed out. My question is after I pay them both of in the next month should I send in additional money to raise the limit on the prepaid to help decrease my utilization or just pay them off and keep utilization under 10% and wait out the damage that having maxed out and gone over the CL on both cards has done to my FICO?


Limits are irrelevant to FICO scoring (not the case with some other models but FICO is the one to worry about imo), and going over the limit isn't a problem in the current market. Increasing the secured card limit is only beneficial if you're putting down non-trivial cash and even that's debatable - only use is for future limits with the way some CC issuers anecdotally issue new lines based on prior ones.

Pay them off, go on with life, you'll be fine. The bulk of revolving utilization is instant-in-time anyway.

takeshi
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Re: Question about rebuilding after maxing out carrying balance

Postby takeshi » Fri Jun 26, 2015 8:49 am

canesfan wrote:My question is after I pay them both of in the next month should I send in additional money to raise the limit on the prepaid to help decrease my utilization

Your call to make. You can certainly increase the limit to help, or make payments to manage it, or do both.

FYI - secured and prepaid are not the same thing.

canesfan wrote:wait out the damage that having maxed out and gone over the CL on both cards has done to my FICO?

Unless you're stuck in a bucket your scores will update as soon as the reported balances update.

Vermonster
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Re: Question about rebuilding after maxing out carrying balance

Postby Vermonster » Fri Jun 26, 2015 7:56 pm

canesfan wrote:I have two credit cards both with CapitalOne. One is a Quick Silver Cash Rewards with $500CL and the other is a Platinum Secured Card $1000CL. My FICO is 540 and I have both cards maxed out. My question is after I pay them both of in the next month should I send in additional money to raise the limit on the prepaid to help decrease my utilization or just pay them off and keep utilization under 10% and wait out the damage that having maxed out and gone over the CL on both cards has done to my FICO?


There is no history to utilization so next month when your zero balance reports you should see a big jump in scores.

Revelate wrote:Limits are irrelevant to FICO scoring (not the case with some other models but FICO is the one to worry about imo)

Limits themselves are not a factor in the FICO number, but they are not completely irrelevant. Your limits will impact you utilization which is a large part of your score. High limits can also show new lenders that you are responsible, and can offer high limits in return. Too high a limit can also be a reason for denial (well that's what they'll say).

Revelate wrote:going over the limit isn't a problem in the current market.

Going over the limit can have some serious consequences. First of all it is not possible on every card, some will flat out decline the charge if it will put you over limit. On others, you have to pay the amount you go over before your next statement. On such low limit cards his monthly payment could be $25. But spending $500 over his limit makes his minimum payment $525. Missing this payment can result in APR spikes, or account closures. The result will stick on a credit report for years.

Revelate wrote:Increasing the secured card limit is only beneficial if you're putting down non-trivial cash and even that's debatable - only use is for future limits with the way some CC issuers anecdotally issue new lines based on prior ones.

For someone with so few cards, at such low limits, and a low FICO, I don't see many options. I think it will take at least a year of rebuilding to get to the stage where lenders will be giving a decent starting limit. if canesfan can live that long with a total limit $1,500, and manage utilization properly, then yes it isn't worth it. Then again, it isn't like that money is lost forever, think of it like a saving account for the next year.
Chase Freedom $9k~~Chase Sapphire Preferred $6.5k~~Amex Blue Cash Preferred $12.4k~~Citi Double Cash $4.7k



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