I'm trying to raise my FICO scores quickly so my husband and I can get an FHA mortgage and buy a house this summer. I have $200 extra to throw at cc debt this month. One of my cards is over the limit by about $150--so I could get that balance below limit, OR I could completely pay off the balance of another card that only has $175 left on it.
Which option would raise my FICO score more quickly? I know that my debt to available credit ratio will be the same no matter how I apply the $200, but would getting that one balance below limit be better for my score? To be honest, I'd rather just completely pay off the low-balance card and get the other below-limit when I get paid next week, but if being above limit is hurting my score I'd rather get that taken care of ASAP.
Thanks for any advice!
Home mortgage is going to look at much more than just FICO. They are going to look at total debt to income as well.
So, you are well advised to improve your FICO. But improving your FICO is merely a numerical representation of improving your credit worthiness.
1. If you do not get charged Over Limit Fees and Default Rate APR, then pay the $200 toward killing the other balance.
2. I suggest having a garage sale and/or ebay sale to sell off the old junk, unused and unneeded gizmos and stuff lying around. You would be amazed. People raise hundreds and sometimes thousands of dollars this way which would go a long way toward paying down additional amounts, on top of the $200 you have. You could do this this weekend or next and have more than $200 this month and then pay not only low balance, but over limit, plus possibly much more. (Plus if you are going for mortgage and will be moving....garage sale is great prep to make move easier!)
3. Tighten the budget belt. Kill luxuries, going out to eat, movies, impulse buying.
4. Put your credit cards away, out of sight, out of reach, out of mind and do NOT use them.
5. Call your CC companies and request waiver of Annual Fees and ask for reduction in APR. Sometimes you can get one, the other and occassionally both.
6. Create a household budget. Know where your money is going. Make a plan.
7. Use the Dave Ramsey "snowball" payoff plan. Either pay as much as you can to lowest balance card each month till paid off (or to highest APR / Fee account), then when paid off, pay those amounts on top of minumums to next account.
8. If possible, get a part time job for extra cash short term. A few hundred extra bucks a month till you get where you need to can be helpful.
9. If you have Credit Cards that you can possibly get a CLI with only "SOFT PULL" consider asking for a CLI to reduce utilization percentage....but do NOT chance a hard pull if going for a mortgage.
Luckily I'm not charged fees for going over my limit on that particular card...
I'd suggest double-checking on that. Things may have changed.
I'm trying to find a disclosure I received a few months ago, amending the terms on one of my cards, which never charged an over-the-limit fee. But it does now!
I hope I'm just being paranoid, but the way things are today, you just never know what may have happened when you blinked!
Welcome to the forum, lovestreet!
P.S. Nice post, txjohn!