Best strategy to decrease high credit utilization? (83%)

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Best strategy to decrease high credit utilization? (83%)

Postby itsmillertime109 » Thu Mar 22, 2012 12:07 am

Hey All,

So after signing up for Credit Karma, I realized that I have fairly high credit utilization at 83%. However, my score (through Transunion) is between 710-720, so would adding an additional credit card help my credit score by decreasing my utilization? Should I just request a credit line increase? Will those hard pulls affect my credit score worse than high utilization?

Here are a few financial details.

Credit Cards:

  • Capital One Venture Card (98% Utilization)
  • Bank of America (32% Utilization)
    *always make minimums, never any late payments*

  • Student Loans at APX. 20k
    *have been deferred due to unemployment, but still accruing interest*
I am always current unemployed, cutting corners as best I can, selling items on ebay, etc.

I love my capital one venture card. It saved me so much money in my travels in Europe, and their online system works so much better than Bank of America.

Any advice would be greatly appreciated. :)

PS - I love my capital one venture card. It saved me so much money in my travels in Europe (no foreign fees), and their online system works so much better than Bank of America.

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Location: Virginia

Postby JCarter » Sat Mar 24, 2012 10:55 pm

What are your current credit limits and interest rates? Maybe we could give some advice on transferring balance while you make payments. Obtaining more credit right now might not be your best option.

Posts: 2
Joined: Wed Mar 21, 2012 11:43 pm
Location: NJ

Postby itsmillertime109 » Sat Mar 24, 2012 11:49 pm

For capital one, I have a limit of $3000, and the Bank of America card is $900. I've been paying 0% APR for my capital one card, but I believe that in a month or so, the APR goes back to 15.99% (don't quote me).

The Bank of America card has a 7.24% APR last time I checked. Not sure if a balance transfer will help considering I have no open credit to transfer into. Better to just pay off the cards as quick as possible?

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Postby Crashem » Mon Mar 26, 2012 8:41 pm

This is a complicated question. It depends on how fast you can pay down your current cards. As for your credit score, remember credit karma's credit score is a FAKO and not necessarily accurate. Recommend getting real FICO score from myfico (just get one credit bureau's).

As for how getting a credit line increase or new cards will affect you: You will take a hit on FICO from new hard inqury. Inquiries make up 10% of your score so it will vary on how many other inquiries in last 2 years. The increase in available credit will help your utilization rate but the key amounts there are 80%, 50%, 30%, 10%.

But you are really asking two different questions. There is what is better for my credit score and what is better for me financially. There are not the same. Yes, high utilization is bad for credit score and so are inquires, but as some suggested earlier, getting another card with 0% APR is good for you financially as you can transfer balance and pay no interest while you pay the debt off.

The way I would be looking as your situation is consider how long you think it will take you to pay your debt off. Figure out if you can qualify currently for a 0% apr card (hopefully with no annual fee) that you can transfer outstanding debt to and pay off that debt within the timeframe.. The fact is there is no reliable investments that will guarantee a rate anywhere close to what you will be paying on your credit cards so financially speaking your best bet is to pay that debt off. Minimizing the interest you pay should be your financial goal. Your credit is only a tool towards that end. As for your long term credit goals, you should look at cards which have no annual fee so you can keep the card long term even if you hardly use it and therefore helping your AAoA.
Amex Centurion, Amex Platinum, Amex BCP 8k->24k (5/23/12), Amex TE 15k, Cap One 1.5% 15k->20k (8/7/13), CSP 25k, Chase Palladium 100k, Citibank AA 35k (AU), Firestone 1.8k->2.2k->2.4k (8/20/12), JFCU Jloc 30k, PenFed Plat Rewards 30k, SF Fire 30k, US Bank Cash+ 25k

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