Re-financing strategy

[Anonymous]

I have a small windfall coming my way which I'm hoping I can use to improve my debt situation.  My question is, if I pay off all my credit cards and a big chunk on my auto loan (about $18K presently) how long will it take for my credit score to improve so that I can get a decent interest rate on a refi?  My score is now about 560.  I'd like to get into a situation where I have a loan payment of about $200/mo for no more than three years.  What kind of credit score do I need on what size of loan before I can do that?  In other words, how much do I have to pay off on the loan now?  

Woud it be wiser to pay off most of my credit cards, then pay very regularly on the balance?  Would that improve my credit score faster than if I paid them off completely?

[Raziel77]

I would suggest to pay off as much as possible on your credit cards, since they have the higher interest rates compared to other loans and they have the fastest effect on credit score.

If possible to pay off all credit cards and leave one of them with amount due that is 10% or less of the overall credit limit of your credit cards. You don't want to show all your cards utilized.

You may pay some of the car loan if there is money left over, or you can save it for a rainy day.

[Appleman]

keress, if you feel comfortable, please add some details.

What I have currently from your post:

You owe $18,000 on a car loan. What is the APR and number of payments left

How much do you owe on the cards compared to the limits?

Paying the credit balances down will be the best bang for the buck. 

Let us know and the community can provide more guidance.

[Anonymous]

The interest rate on the car loan is very high over 12%.  I have about 5.5 years left on it.  The cards are almost all maxed.  I will be able to pay them all off at least.   So, the question is, what's the least I can pay off on the car and be able to re-fi with a monthly payment not much over $200 for not so many years.

[Hoya08]

If CCs are paid off, wait until your credit score qualifies for the lowest refinance rates.

If you qualify for 2.99% APR (TODAY), and have no CC debt, a loan around $11,000 at 60-months will be approx $200 per month. 

[Anonymous]

Thanks so much.  You think my scores can improve that much just by paying off the CC's?  

[StartingOver10]

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@Anonymous wrote:

Thanks so much.  You think my scores can improve that much just by paying off the CC's?  

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It's hard to know because we don't know what is on your report but paying off maxed out cc's should boost your score considerably.  Do as one of the posters above suggested, pay off your cc's except for one and have it report a very small balance (like $10).  

[fltireguy]

If, as you state, all of your cards are maxed, or at least over 80% util, with NO OTHER derogs at all, you should easily see a 80-100 pt jump

[Anonymous]

I don't fully understand what your goals are.  A car payment of $200 is a broad goal, how much principle, months of payments etc will dictate the payment.  With scores of 560 you won't find anyone willing to refinance you and my guess is your loan to value ratio has way too much negative equity to refinance at this point.  Your first and primary goal should be to rebuild your scores into the mid 600's you can do that by paying down and if at all possible off your credit cards.  Utilization can impact your scores by 30%.  Take a close look at your reports for any negatives you can get removed or corrected.  The place to go for getting your rebuild under way is the rebuilding section.