@tallgirl375 wrote:I posted the message below in the Mortage Forum last week, but it may make more sense here (no one has responded.)
The fact that we have over 10k credit card debit makes me really nervous. I would LOVE any and all tips to help our score before pre-applying for a mortgage loan. I expect to receive a little money in Feb/March and would like to apply it to the cards correctly. My biggest question is do I use an old card to move balances for better utilization or pay down the cards with high balance-0 % interest. Thank you in advance!
Message:
We have owned a home in the past and have been leasing for 2 years in Texas. We would like to pre-qualify for mortgage loan and hopefully beat the rush before the crazy end of school house selling frenzy begins. My question is what do we do with our credit card situation? We both have good credit (650-702), but want to be in the best shape possible before reaching out to a mortgage officer.
We have 4 credit cards: 2 have large balances with 0 percent interest until August 2017, the 3rd card has not been used in years, has a 7k limit and a 13.49 rate, the 4th card is a Chase Sapphire with a $300 balance and can easily be paid off (rate is 13.49.) In addition to these cards, I also have an Amex Green card that carries a $20 recurring charge. The past few years, we used the Amex for everything because we earned points. Now, we like to use the other cards because the only negative items on my credit report are late payments to AX in May and June 2015, which I disputed last year. It was summer - we were traveling and had people in town - technically they were late. 2x I've been late and a card member since 1999 - so irritating!
Does it make sense to spread the larger balances to the other two cards with an APR or leave it as is and focusing on paying them down? According to Mint my current utilization is 31% in total. Do they look at each card, I assume so? What are the tricks to making our situation as positive as possible? I read about keeping a $2 balance on credit cards because it bumps up your score. Is $2 the magic number - would $5 work?
Also, from a mortgage/home buying perspective - is there an ideal timeframe between now and Dec 2017 to buy a house? Will rates stay low? I know it's hard to tell with a new administration, but any info is helfpul. We don't HAVE to buy a house now, we like the one we are in, but we'd like to start building equity again and find a place for our young family.
Thanks!
The trick in your case is having 3 of the 4 cards reporting zero balance, and the 4th card reporting a small balance (9% or less of the limit). That will optimize your revolving credit utilization.
