Advice about credit cards and mortgage application

[Ellie2014]

Hi,

I will be applying for a (new) mortgage in the near future as we are moving.  My "myFICO" score is currently 713.  A year ago I closed a credit card account (not realizing it would hurt my credit score).  That account has a super-low interest rate with about 12,000 still owing on it, and a credit limit of 30,000, but again it is closed.  My open cards (no balance on any of them) have a total credit limit of 25,000.  So my debt ratio with my credit cards is about 50% as the closed card counts towards it but the closed credit limit doesn't count towards it (this is how I am reading the report I got off of this website).

We are trying to save as much money as possible for a downpayment, as the market we are moving to is a strong seller's market right now and we were told that a 20% downpayment with room to bring cash to closing (if the offered price exceeds appraisal value) is needed to get a house in a good neighborhood.  So my preference would be to not pay off the closed card, although I could.

I am wondering what people think my best option is considering the circumstance:

(1) Just pay off the card, although this will affect my ability to bring cash to closing if it is needed

(2) Transfer the balance to my open cards and ask them to raise my credit limit (one card recently raised one of my limits by a bit and that didn't affect my credit score although I didn't ask them to do it)

(3) Reopen the closed card

(4) Do nothing different

(5) Other options?

My main goal is to try to raise my credit score so it is more in line with my husband's, which is higher (780+ I think), although I am not sure if that info affects things either.  Although other goals may be important too that I am not thinking about.

Thanks for any advice!

[100down0monthly]

If you get your utilization down, and your scores go up, you'll likely get a better interest rate on the mortgage...which will in turn end up saving you a LOT of $$$ in the long haul.

[improvingmycredit]

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@Ellie2014 wrote:

Hi,

I will be applying for a (new) mortgage in the near future as we are moving.  My "myFICO" score is currently 713.  A year ago I closed a credit card account (not realizing it would hurt my credit score).  That account has a super-low interest rate with about 12,000 still owing on it, and a credit limit of 30,000, but again it is closed.  My open cards (no balance on any of them) have a total credit limit of 25,000.  So my debt ratio with my credit cards is about 50% as the closed card counts towards it but the closed credit limit doesn't count towards it (this is how I am reading the report I got off of this website).

We are trying to save as much money as possible for a downpayment, as the market we are moving to is a strong seller's market right now and we were told that a 20% downpayment with room to bring cash to closing (if the offered price exceeds appraisal value) is needed to get a house in a good neighborhood.  So my preference would be to not pay off the closed card, although I could.

I am wondering what people think my best option is considering the circumstance:

(1) Just pay off the card, although this will affect my ability to bring cash to closing if it is needed

(2) Transfer the balance to my open cards and ask them to raise my credit limit (one card recently raised one of my limits by a bit and that didn't affect my credit score although I didn't ask them to do it)

(3) Reopen the closed card

(4) Do nothing different

(5) Other options?

My main goal is to try to raise my credit score so it is more in line with my husband's, which is higher (780+ I think), although I am not sure if that info affects things either.  Although other goals may be important too that I am not thinking about.

Thanks for any advice!

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Hey Ellie2014!  Welcome to the forums!

Couple of questions.. 1.  when will you be apping this morgage? 2.  What are the current cards you have open and what are their limits?  Thanks!  The 2 things really killing your score is of course the high utilitzation of 50% across all cards and second... having a closed card showing a 100% utilization alone.  Let's see what options are available.

[thom02099]

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@Ellie2014 wrote:

Hi,

I will be applying for a (new) mortgage in the near future as we are moving.  My "myFICO" score is currently 713.  A year ago I closed a credit card account (not realizing it would hurt my credit score).  That account has a super-low interest rate with about 12,000 still owing on it, and a credit limit of 30,000, but again it is closed.  My open cards (no balance on any of them) have a total credit limit of 25,000.  So my debt ratio with my credit cards is about 50% as the closed card counts towards it but the closed credit limit doesn't count towards it (this is how I am reading the report I got off of this website).

We are trying to save as much money as possible for a downpayment, as the market we are moving to is a strong seller's market right now and we were told that a 20% downpayment with room to bring cash to closing (if the offered price exceeds appraisal value) is needed to get a house in a good neighborhood.  So my preference would be to not pay off the closed card, although I could.

I am wondering what people think my best option is considering the circumstance:

(1) Just pay off the card, although this will affect my ability to bring cash to closing if it is needed Pay off the card...some mortgage lenders want balances paid to zero

(2) Transfer the balance to my open cards and ask them to raise my credit limit (one card recently raised one of my limits by a bit and that didn't affect my credit score although I didn't ask them to do it)  See above

(3) Reopen the closed card Not likely to be an option, based on anecdotal information provided on this and other forums...once closed, it's closed.  You'd need to reapply, which will result in a new inquiry and, if granted, a new TL that will affect your AAofA, unless that closed card was an AMEX and could be backdated.

(4) Do nothing different

(5) Other options?

My main goal is to try to raise my credit score so it is more in line with my husband's, which is higher (780+ I think), although I am not sure if that info affects things either.  Although other goals may be important too that I am not thinking about.

Thanks for any advice!

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Have you already got a mortgage lender lined up?  If so, run these scenarios through the lender, and get an answer based on their practises.

Many lenders won't even consider a loan with high balances on credit cards (learned that one the hard way), so paying off your balance reaps several benefits. 

Your util is lowered.  With a lower util, your score will likely go up.  With increased score, you'll get better interest rate on the loan.  That's a substantial trade off to bringing less cash to the table.  If that's still an issue for you, consider delaying your purchase until you can do both..pay off that balance (and NOT charge anything that can't be paid off monthly), and save more to bring cash to the table...at a later date.