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I don't handle credit very well (except for the big stuff like mortgage and car loans) and would prefer to have lesser access to it. I know, this will reflect on me negatively but I feel that I abused my CCs in the past and I need to learn to use them effectively.
It is difficult to make the effort to learn from our mistakes instead of blindly repeating them. The fact that you recognize that you need to devote some attention to handling this part of your life actually reflects on you quite positively in my eyes. Best of luck!
Its not the reduced credit limit that affects your score, its the amount you owe as a percentage of your credit limit that will affect your FICO. Yes-in your situation its sounds that paying off your balance will impact your FICO because they are also reducing your limit but that doesn't mean that you should not continue to pay it off. Once you pay off those balances and be responsible about your credit, your FICO will recover. The worst thing you can do right now is stop paying off your balances just because of what it might mean to your FICO score.
I owe about $100,000 in credit cards at an APR of 8% so I haven't been in a hurry to pay them off quickly. I now have the cash to pay them off in full but if I do I know they will reduce my credit line which in turn will effect my credit score. This happened on one of my credit cards that I paid off in full $20,000 and my credit line was reduced to $500.
How can I pay them off without and keep my credit line and most importantly also keep my credit score.
I've never been late and am technically a perfect customer.
I owe about $100,000 in credit cards at an APR of 8% so I haven't been in a hurry to pay them off quickly. I now have the cash to pay them off in full but if I do I know they will reduce my credit line which in turn will effect my credit score. This happened on one of my credit cards that I paid off in full $20,000 and my credit line was reduced to $500.
How can I pay them off without and keep my credit line and most importantly also keep my credit score.
I've never been late and am technically a perfect customer.
Thank you for your help.
Bryan
Credit scores are based on utilization. So if you have available credit of $1000 and $0 balance your utilization is 0%.
If you have 10k balance and 10k available credit then your utilization is 100%.
The first case would give you a better score even though the credit line is lower.
The most important part is that you do not pay 8% interest. That is a lot of your hard earned money.
Do keep some cash in hand as an emergency fund though.
Credit scores are based on utilization. So if you have available credit of $1000 and $0 balance your utilization is 0%.
If you have 10k balance and 10k available credit then your utilization is 100%.
The first case would give you a better score even though the credit line is lower.
This is correct. It's best to keep your utilization under 30%.
I owe about $100,000 in credit cards at an APR of 8% so I haven't been in a hurry to pay them off quickly. I now have the cash to pay them off in full but if I do I know they will reduce my credit line which in turn will effect my credit score.
I don't know your financial situation, but this sounds like a penny wise, pound foolish approach to me. Why pay that 8% interest if you don't have to? That is $8000/year JUST going for interest! All that money just to preserve a credit line or FICO score? Talk about the tail wagging the dog...
Quote:
Originally Posted by bryanm007
This happened on one of my credit cards that I paid off in full $20,000 and my credit line was reduced to $500.
The credit card company reduced your limit on that card to $500 because it sees you as a risk. They are worried that with 100K of credit card debt that you are going to go into default. They chopped your limit to prevent you from maxing out the credit line too. Having 100K is seen as a HUGE RISK to them and you are making them nervous by borrowing so much of your limit.
Quote:
Originally Posted by bryanm007
How can I pay them off without and keep my credit line and most importantly also keep my credit score.
I've never been late and am technically a perfect customer.
Thank you for your help.
Bryan
Why do you need a credit line exactly? Why do you want to be a perfect customer for them? I don't get this line of thinking...
You Are Much More Than Your Credit Score « Consentwithdrawn’s Blog (http://consentwithdrawn.wordpress.com/2009/03/17/you-are-much-more-than-your-credit-score/ - broken link)
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Best of luck!
