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I have worked hard to get my FICO up to 713. I'm proud of that and want to keep it up as I am planning on seeking a mortgage after the first of the year. I was offered a credit card with 0% interest for the first year, and that includes balance transfers. I am carrying a small credit card balance on other cards which add up to $2500.00, at a 13% rate. I really don't want to use savings to pay that off as I am holding onto whatever I can for the downpayment. My question is this: If I take out the new card and transfer my balances over, what impact will that have on my FICO score? Or would it be better to keep things just as they are, and pay this debt from the exiting (high interest rate) accounts. PS: From equifax: My oldest credit card is, 4 Years , 2 Months. The average account age is 2 Years, 9 Months. Thank you for the information.
Hi Pamela:
Strictly from a credit score standpoint, I think it may be risky for you to open the new card. You run the risk of lowering your the average age of your credit cards too low. Also creditors, including mortgage companies, are skeptical of new credit. Your score also would go lower with fits in the "new Credit" section of the FICO scoring model. You also would likely take at least one credit inquiry.
This is not a guarantee and the FICO scoring model is NOT public knowledge. There also have been cases when opening up new credit has improved a score. This typically in cases where lower utilization and a more diverse credit portfolio is then created. The problem is it is not known and more often LOWERS the score and once it's done, it can't be reversed. So I think it is a risk I would not take from a credit score standpoint if you are looking at a major credit application in a couple months.
From a FINANCIAL standpoint, 13% on $2500 is $325 for 12 months. Of course, the actual interest should be a decent amount lower than this because your balances should be getting lower each month, reducing the interest you pay each month. So you have to make a decision if you can afford the interest and if it is worth the risk to you.
Good luck, I hope this helps.
Regan
www.ficofighter.com
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| Rating(1-10) | Knowledgeability = 10 | Clarity of Response = 10 | Politeness = 10 |
| Comment | Thank you so much for your detailed response. I will postpone on the offer until I have secured a mortgage. | ||
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Answers by Expert:
Regan Shinski
Expertise
I can answer questions on collections, repossessions, bankruptcy, credit repair, credit counseling, FICO scores, credit planning, and the cause and effect of credit related decisions. I can also answer questions on collection settlements and preparing to sue your creditors for false debts and credit reporting.
Experience
Fifteen years ago I was financially devasted due to severe health issues. I filed bankruptcy, had a foreclosure, car repossession, tax lien, and ruined credit. I immersed myself in credit law. I settled dozens of accounts and had them removed to improve my credit. I personally sued four creditors and collection agencies and won cash settlements for their false reporting on my credit reports.
Since then, I have completely recovered and have nearly $100,000 in revolving credit lines and perfect credit. I have owned a credit repair company for the past five years and have an additional three years of specific work in the collections and debt management industry.
I am fully versed in the Fair Debt Collection Practices Acts (FDCPA), Fair Credit Reporting Act (FCRA), and have used them successfully in collection settlements and lawsuits for myself and others. I am also familiar with and abide by the Credit Repair Organizations Act (CROA).
I have deleted or helped delete literally hundreds and hundreds of derogatory items from consumers' credit reports and helped negotiate many settlements with collection agencies and creditors. I have also advised people on bankruptcy at any stage.
In the current credit market, I have successfully advised numerous people on how to obtain credit and how to negotiate for better terms.
Education/Credentials
BA - University of Minnesota
Past/Present Clients
(private)
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