High credit utilization affect on credit score?

Dae Asked: High credit utilization affect on credit score?

Hi, I was just wondering how my credit score will be affected by my high debt to credit ratio.  Last time I checked my FICO I had a 725 (May 2011). I am trying to get a loan for a used car but am afraid of being denied.

It would probably help if I told you a little about my credit history. I had a one year installment loan from first quarter 2010 to 2011. I paid that off a month earlier than due.

In March of 2011 I got a credit card with a $4000 limit, and in May I got a Macys credit card with a $300 limit. These are all the loans/credit I have ever had, my average account history is 8 months. I maxxed the Macy’s card out because I only got it for the 30% savings (bad habit I know). The credit card I have never had a balance of over 10%.

For both cards I pay over triple+ of the minimum payment, so that I can get it over with sooner. I have never been late for any loan/credit payment.

Just recently I had to use up alot on my credit card. It now has a balance of $2900, and $75 for the Macy’s card.

I plan on paying $600 on the credit cards next due date, and paying off the Macy’s on its next due date as well.

After that, I will make a payment plan to where I can get the credit card balance and interest paid off in 10 months.

How badly will this affect my score and how long will it take to repair it. Will it ever get above the original score of 725?

The balance also shows up on my authorized card holders credit report, will this mess up her chances of getting a loan? She has no credit history at all.

And lastly, should I even bother with applying for a car loan?

Thanks in advance.

Answers:

Guess Who Answered:
Your credit scores are only part of the criteria lenders use to determine your credit worthiness.
Your income and other debts also play a part in the decision.

Paying a debt before it is due doesn’t help your credit scores. Your debt to available credit ratio might, however.

Opening too many new accounts or having too many inquiries hurt your scores.

Only time can increase your credit scores. Your credit scores are not based on how much you owe, but on how well you handle your finances.

When someone co-signs for credit for someone else, the co-signer guarantees that the bill will be paid of the borrower defaults. If this is a joint account, the both account holders are both responsible for 100% of the debt. The creditor can choose which one he wants to pursue if you default. So yes, your debt may prevent your co-signer/joint account holder from obtaining credit.

Hold off on the car loan for now.

Good luck.

BungalowMo Answered:
Closing your cards when you only have an 8 month credit history is a very very bad idea.

To learn more about how credit scoring works, this thread from the myFICO forums is the most informative & accurate information you’ll find in one place.

Not all links within will pertain to your situation, but many will.

Those folks got me from mid 500 FICO’s to mid 700’s today..They ROCK!!!

EL Answered:
Close any credit cards you do not use and never use more than 1/3 of the available balance AND pay more than the minimum payment. Before applying for a car loan, find out what you can afford to spend on a monthly payment including insurance and maintenance. Going in knowing what you can realistically afford will keep you from tanking your credit score because you got a loan you really can not afford to pay.

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