Problem
A potential home buyer is wondering about her credit card accounts and the effect that they may have on her credit score which will be evaluated when she applies for a mortgage loan. At present, she has three accounts with credit limits and balances outstanding as follows:
She would like to transfer the balance in account #2 to account #3 in order to save the membership fee and because the interest charges for account #2 are higher than the others. If she does this account #2 would be closed.
Account - Limit - Outstanding Balance
(1) - $ 5,000 - $3,450
(2) - 10,000 - 5,450
(3) - 15,000 - 8,450
Task
1) How much credit capacity is she currently using?
2) If she cancels account number 2 and transfers the balance to account number 3, what will be the capacity used now?
3) After the transfer, how much would an increase in the total credit limit have to be in account number 3 to restore the total capacity used in all accounts prior to the transfer?