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I just paid off all of my credit cards, which, I must say, is a huge relief!! My question is now that they are all paid off, do I close any of them? I have read the posts about closing cards, but I am still confused. I have never had any late payments on anything, but do have 2 medical collections that are about 3-4 years old. Here is my situation...
Bank of America CC - $1100 CL, $0 Balance
Maurices CC - $930 CL, $0 Balance
RCWilley - $1500 CL, $0 Balance
I also have a roughly $16,000 car loan at 6.25% and a $5500 student loan (that I don't currently have payments on, as I am still in school)
We are trying to get everything in line to get a mortgage, eventually. My credit has taken a huge hit since we bought our vehicle in December and I am trying to recoup so I could possibly qualify for a mortgage on my own as my husbands credit is in need of major repairs.....Any suggestions
Do not close anything. It will not help your credit.
You might consider adding another major card if you are not planning to apply for a mortgage in the next few months.
Congrats on your accomplishment! Unless your cards are costing anything to keep them open (annual fees, maintenance fees, etc) I would leave them open. In addition, it would be helpful to your scores to use them sparingly (paying in full of course after you get the statement) to show usage on your CR. This helps show you can use credit responsibly. Keep your utilization under 9% when allowing the CC to report a balance (ie $99 or less balance on the BOA card). You might want to check out the "Understanding FICO scoring" board- I found it immensely helpful.
Perhaps someone else can chime in on the collections?
Do you know what your debt to income ratio is? If it is still pretty high, then you may want to see about either having the car transferred only to your husband's name, or trying to get it paid off. As it stands, if you are trying to get a mortgage with only your credit, then you will only be able to use your income, thus will need to qualify more on a debt to income perspective.
EDIT: If you already have a creditor in mind that you are looking at for your mortgage, take your credit report in and let them assist you with regard to the collections. Usually all open collections have to be paid with regard to a mortgage. It won't help your FICO if they are paid, but will help your mortgage situation.
Well, lets see...I am not sure how to calculate the debt to income ratio, can you tell I am totally new to this sorry!
The car is in both of our names now, but I am not sure if I could even take my name off as they went off of my credit score for the interest rate..
I make about $26,000/year by myself. The mortgage loan would only be $100,000 though..not sure if that makes a difference as my grandparents are gifting equity.
Let me know if any other info is needed, all of you have been a great help already.
Thanks!
Whitney
@Anonymous wrote:I just paid off all of my credit cards, which, I must say, is a huge relief!! My question is now that they are all paid off, do I close any of them? I have read the posts about closing cards, but I am still confused. I have never had any late payments on anything, but do have 2 medical collections that are about 3-4 years old. Here is my situation...
Bank of America CC - $1100 CL, $0 Balance
Maurices CC - $930 CL, $0 Balance
RCWilley - $1500 CL, $0 Balance
I also have a roughly $16,000 car loan at 6.25% and a $5500 student loan (that I don't currently have payments on, as I am still in school)
We are trying to get everything in line to get a mortgage, eventually. My credit has taken a huge hit since we bought our vehicle in December and I am trying to recoup so I could possibly qualify for a mortgage on my own as my husbands credit is in need of major repairs.....Any suggestions
Congrats on paying everything off!
Are these the reported balances, that show on your reports? If so, go buy a tank of gas with one card, pay off all but $10 online, and let that $10 report on the reports. (Then don't forget to pay the $10. ) You'll do better with one card out of three reporting a minimal balance, especially on EQ. You don't technically need to do this until about 6-8 weeks before applying for the mortgage, but since there are sometimes delays in updating, it's nice to fine-tune them now.
As for the car loan, it shouldn't be hurting that much now, after 8 months. What are your EQ and TU FICO scores, and what are the negatives listed in order on screen 2 of each report? That's what you need to target.
It looks like the medical collections are now the only negatives in your reports. If they're not paid, have you contacted the original hospital/ provider and offered to pay? If they agree to take the collections back and you pay them (the original creditors) directly, you should be able to get the collections off your reports. (This is something unique to medical collections, due to HIPAA.)
I meant to add: I agree with the others; do NOT close your cards. You need to have current, open revolving credit (aka CC's) to generate good FICO scores. Revolving debt is riskier to lenders than installment debt, so good revolving history is rewarded more than good installment history.
Just keep using them once a month for something that you'd buy anyway, and pay them off online. That's not debt, IMO, that's just choosing to pay with credit instead of cash, checks, or debit cards, and paying back immediately.
Debt to income ration essentially means how much you owe vs how much money you make. For example, say your net pay (before taxes) is $2000 per month and your debts are $1000 per month. Your debt to income ration (DTI) is 50%. Lenders vary in what DTI % they find acceptable when lending money. If you're considering a mortgage, you may want to ask the lender about their DTI guidelines. In addition, most have guidelines about how much of a percentage the mortgage payment can represent of your income- generally around a third. So, using the above example of making $2000 per month, your mortage payment could likely be no more than $670 per month, including taxes and insurance.
Again, it would probably be a good idea to get a copy of your credit reports and take them to a lender for advice on what needs to be cleaned up and to ask them about DTI guidelines, etc.
Congrats! I recently paid off my debt. It took me soon time, but it feels good to be debt free.