Help please

Housewar

I would like some general advice please. I have an option to move some credit card debt from one card to another, the current apr is 21.9 and the new one would be 6.9. It makes sense to move but what I am concerned about is that it pretty much maxes out the one card . We are looking to get a car loan soon and am worried i wouldn’t be accepted. My credit through credit karma is 608, would I be accepted on that? Should I raise how much I can borrow on the cards so that I am not using so much utilisation ?

EssexHebridean

You sound like a very good candidate for our usual initial advice to complete an SOA (Statement of Affairs) and post that in here for further input. The link to the calculator this this can be found in my signature below, and also in the "sticky" post at the top of the board. 

Ignore your credit "score" - that's not important. Lenders simply don't see it so it has no relevance. What does have relevance is your credit history - that is what lenders get a view of. Do you have a clear picture of what caused the debt in the first place, and has either the situation changed, or have you put steps in place to deal with the cause and prevent it occurring again or getting worse?

Your utilisation looks at all the lines of credit you have available - so if you are currently using 50% across 3 cards, then transfer card 3 to card 1 for a lower APR, if you keep card 3 open, but empty, your utilisation remains the same. If however you closed card 3, that would increase your utilisation figure. 

To balance transfer for a lower APR is certainly sensible - assuming that the 6.9% is on a "life of balance" basis and allows you to transfer to it. If there is a fee, you would need to include that in your calculations of course. What would be better would be to balance transfer to a 0% card - have you checked the likes of the MSE Credit Club (free) to see if you have any chance of being accepted for any of those? Do bear in mind that applying for a new card now would affect your credit file though.

My suggestion would be to complete the SoA and post that in here (use the "format for MSE" option, then copy and paste into a new post in the thread) and then we can look at your budget overall and see how things are working generally. How much do you currently have saved for a replacement car, and do you have equity in a current vehicle that you will be part exchanging? Is it possible to for the time being use your saved funds plus perhaps some of your emergency fund (you do have an emergency fund, hopefully?) to buy an older vehicle that will see you through a few years until your overall situation is better? 

fatbelly

Housewar said:

I would like some general advice please. I have an option to move some credit card debt from one card to another, the current apr is 21.9 and the new one would be 6.9. It makes sense to move but what I am concerned about is that it pretty much maxes out the one card . We are looking to get a car loan soon and am worried i wouldn’t be accepted. My credit through credit karma is 608, would I be accepted on that? Should I raise how much I can borrow on the cards so that I am not using so much utilisation ?

I don't see why that would be a problem. Obviously don't spend on the new card.

What have you got in mind for the car loan? Have you tried the pre-eligibility checker?

https://www.moneysavingexpert.com/eligibility/loans-calculator/search/

CliveOfIndia

As EH has said, your score has no bearing whatsoever on how a lender will view you - not least because they don't even see it.  What they will be interested in is your credit history (i.e. the data contained within your credit files), your income and any existing debt.

Utilisation percentages are a tricky one.  On the one hand, a high utilisation could be viewed negatively as it gives the impression that you're reliant upon credit.  On the other hand, a large amount of unused credit could also be less than ideal - you could be in the situation where you currently have a relatively small amount of debt, but potentially you could go on a spending spree tomorrow and rack up a whole load more using your available credit.  Different lenders each have different lending criteria, and will assign different weightings to each factor, so it's nigh on impossible to give a definitive answer as to which scenario is "better".

As far as it goes, shifting debt to a cheaper rate of interest is obviously usually a good idea.  But you do need to factor in any fees which may be applied, and you need to check how long the promotional rate lasts for.

One thing to think about - can you afford a loan for a car?  The fact that you're currently carrying a balance on an interest-bearing card implies that you can't afford to repay it ( if you could afford to repay in full, you wouldn't voluntarily be paying interest ! ).  If you then lumber yourself with monthly loan repayments on top, you're going to find it even harder to repay the credit card debt.

If you're able to repay the card debt first, this will (a) increase the likelihood of being able to get a loan at a decent rate and (b) make it easier to afford the loan repayments.  That's leaving aside the perennial discussion about whether it's a good idea at all to take out a loan to buy a depreciating asset.

Please don't take this as being condescending, that's not my intention at all - rather, just an objective view from an impartial outsider

TheAble

If you've built up that credit card balance through general overspending then adding a car loan into the mix is going to be a bad idea as it's going to put further strain on your budget. Just wanted to sound the note of caution before you continue down what has been a slippery slope for many.

Paddywackerty

I got into serious debt many years ago,and made the decision never to have another debit or credit card and only deal in cash.
I was doing ok but somehow the cash in my pocket seemed to just disappear and I would see nothing for it. A friend told me they had the same problem but they got a debit card. I reacted by stating that I would never go down that road again but it was pointed out to me that I could only use my own money. After a lot of thought I got the debit card and now the rest is history and now able to pay my way with great peace of mind

enthusiasticsaver

I would do an soa first. Given you have already built up debt on credit cards further borrowing seems risky at the moment. If you aren’t able to get 0% deals for the cards you won’t get a decent loan rate either. Sort the credit cards out first assuming the new car isn’t essential. 

The credit score is meaningless. It is your credit record and utilisation lenders see. How much debt do you have?