Would you borrow at 0%?

Question

For those of you that deal with property values of $100,000 or less and have good credit, this can be a really good deal.

Recently, I spoke to an investor out of Texas that financed 100% flip with 0% APR credit cards. The purchase was a little less then a $100,000, but he says that he has enough credit limit on his credit cards to finance $150,000. I guess he applied for a bunch of them at one time, and some have credit limits of $20,000. The guy is in the medical field and has really good credit.

I'm not sure how he got 0% APR on cash advances, but I added a website so that if people are interested they can apply: 
[Site Removed]

What do you think? Would you do it?

Account Closed · Answer

I've never been able to find a 0% rate on cash advances.  Lot's of seminar sellers claim they are available but have never been able to produce a source.  If any one knows of one I'd suggest using all you can get...

Walter Shkolnik · Answer

The truth is that Credit Beau’s credit scoring method is their closely guarded trade secret, and they update it all the time to adjust for different factors. Otherwise it would be too easy to manipulate. Therefore, it is impossible to tell exactly how different actions will affect your score, unless you have somebody on the inside of the credit bureau who can deliver the up to date algorithms.

Scott Miller · Answer

It is no secret that doing things like paying your bills on time or reducing your available debt to credit limits to 30-35% will yield an increase in FICO scores---the mystery is the lack of predictability in how much your scores will improve (or fall in the event of negative items)...

Here is how your score is computed:  
 
I.  Payment History (35% of your score)
- The number of accounts paid on time effect your credit score.
- The number of negative public records and/or collections reported 
effect your credit score.
- The number of delinquent accounts affect your credit score.  
- How long you have been past due affects your credit score.
- How long it has been since you have made a late payment.  
 
MORAL:  Pay your bills on time
 
II.  Amounts Owed (30% of your score)
- How much you owe on each open account effects your credit score.
- What types of accounts you have with balances effects your credit 
score.
- How much of your available credit you have used affects your credit 
score (revolving credit).
- How much you owe versus the original balance effects your credit 
score (installment debt).  
- The number of zero balance accounts you have affect your credit 
scores.  
 
MORAL:  Try to keep all outstanding credit debt between 30-35% of 
available credit to maximize your credit scores.
 
III.  Length of History (15% of your score)
- The length of time your credit accounts have been reported to your 
credit report effects your credit scores.
- The length of time your credit accounts were opened effects your 
credit scores.
- The time between activities affects your credit scores.  
 
MORAL:  The longer the history (good or bad), the better or worse your 
scores will be.  
 
IV.  New Credit (10% of your score)
- The number of new credit accounts you open affects your credit scores.
- The ratio of new credit accounts to existing accounts affects your credit 
scores.
- The number of credit inquiries you have had affects your credit scores.
- The time elapsed since your last inquiry or the opening of a new credit 
account affects your credit scores.
- The length of time of your on time payments since your last late payment 
effects your credit scores.
 
MORAL:  Don't open up too many new credit accounts at once.  
 
V.  Types of Credit in Use (10% of your score)
- The total number of credit accounts you have affects your credit
scores.
- The types of credit accounts (installment, revolving) you have effects your 
credit scores.     
 
MORAL:  A good mixture of credit accounts (mortgage, installment and 
revolving) will lead to higher scores.

Regards,

Scott Miller

Scott Miller · Answer

The is answer to the question, "would it ruin your credit"...most likely.

Once your debt limit exceeds 30-35% of the available credit, your scores are going to take a good hit (30% of your score is derived from your outstanding balances).

Regards,

Scott Miller

Mike W. · Answer

I have taken 25k out on a 0% card for 6 months.  Repaid it and they raised my limit.  My credit score increased.  If you have the card balances outstanding for an extended period, you may have more trouble.

The trouble I see with the idea, is that generally the 0% is for purchases only.  Also, cash advances don't qualify for the grace period and begin accruing interest from day one.  For cash advances it is rare to find a 0% card.  You would have to put together a pretty good scheme to be able to consider it for the purchase rate.

Craig L. · Answer

Sure, I'd borrow at 0% til the cows came home. But not if it would ruin my credit. Would maxing out your credit for a few months do that? I don't know.

Walter Shkolnik · Answer

I'm not sure. It probably depends for how long you are maxed out. I'm pretty confident that once you pay off those cards, it would improve your credit. So, if you sell the house, make your pofit and pay off the credit cards, your credit will improve quite a bit.