Credit Score and Paying Off a Large Amount of Debt

[Anonymous]

Hello Everyone,

I was lucky enough to have a relative loan me money to payoff about $75,000 in Credit Card debt. We are looking to buy a house and the debt has hurt our credit. We never missed a payment, but inquiries for consolidation loans and the debt load has brought us down to the 550's.

Does anyone have any advice on how long it will take for the credit bureaus to reflect the change. Also, I want and need to close everyone of these account becasue I never want to see them again, even if it means opening two NEW accounts and leaving them with a small balance.

Time is the issue here, we're getting a deal on the house and buying it with a relative.....(mistake?)

Any advice would be appreciated. I thought of rapid recores, but it seems that is only availalbe from the lenders and is for removing negative items.

I was in the mortgage business, so I'm familiar.

Thank you!

[DaveInAZ]

I was lucky enough to have a relative loan me money to payoff about $75,000 in Credit Card debt.

- Wow, I should be so lucky. It's usually my relatives hitting me up for a "loan" (that they never repay)

Does anyone have any advice on how long it will take for the credit bureaus to reflect the change.

- As soon as your statement cycles the CC companies report your new balance

I want and need to close everyone of these account becasue I never want to see them again, even if it means opening two NEW accounts and leaving them with a small balance.

 - Closing them won't hurt your score as they remain on your credit report for 10 years. But opening new accounts will lower your score with new inquiries and the new accounts lowering your AAoA (Average Age of Accounts). I recommend keeping the current accounts open if they have decent terms, don't blame them for your over spending. I'm not putting you down, but $75k in CC balances would indicate not controlling your spending.

[Anonymous]

OP, welcome to the forums!

If your scores are in the 550's, it suggests the presence of negative items.  If debt/utilization was the only problem your score should have been in the 600's somewhere more than likely.  Utilization along doesn't push someone into the 550 range from what I've seen.  Have you gone through your credit reports very carefully looking for negative information?  I would think there has to be something there that you aren't seeing. 

[HeavenOhio]

Definitely pay off the cards. But don't open or close accounts until after your mortgage has closed.

Realize that your score will be dinged if all revolving accounts report zero. Charge something small (about $5) on one of the cards, and let that report. Pay that balance in full once the statement cuts. Continue the process of charging a small amount and paying in full until the mortgage has closed.

You didn't mention if you have any installment loans, but you'll also be dinged if all loans are paid in full. In the short term, get their balances to 8.99% or below. Some information about them (if they exist) would help people here to offer specific advice.

[SouthJamaica]

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@Anonymous wrote:

Hello Everyone,

I was lucky enough to have a relative loan me money to payoff about $75,000 in Credit Card debt. We are looking to buy a house and the debt has hurt our credit. We never missed a payment, but inquiries for consolidation loans and the debt load has brought us down to the 550's.

Does anyone have any advice on how long it will take for the credit bureaus to reflect the change.

A month

Also, I want and need to close everyone of these account becasue I never want to see them again,

No no no no no!

even if it means opening two NEW accounts and leaving them with a small balance.

Time is the issue here, we're getting a deal on the house and buying it with a relative.....(mistake?)

Big

Any advice would be appreciated. I thought of rapid recores, but it seems that is only availalbe from the lenders and is for removing negative items.

I was in the mortgage business, so I'm familiar.

PS Be sure to let ONE credit card account report a small balance; pay it off after the statement cuts but let a small balance report in the statement

Thank you!

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[Anonymous]

One of the things for which you ask advice is this:

we're getting a deal on the house and buying it with a relative.....(mistake?)

People can best give you their opinion when they know what you mean.  You say that you are buying it with a relative, which to me means that a relative will be one of the three names on the mortgage.  The relative in that case is one of the borrowers and will own a part of the home.

It occurs to me, however, that you might have meant that you are buying it from a relative.

Which of the two did you have in mind?

All the other advice you are getting seems spot on.  Keep your cards open, pay them off completely, use one for a small purchase each month, etc.

[Anonymous]

My current credit utilization is at 30%. No collections. Last late payment in 2009, chapt 7 bankruptcy in 2009. My VantageScore is 560 but my Fico is 700.

[HeavenOhio]

PurpleRoyalty68, are you the person who started this thread?

If so, I'd suggest:

1. Charge a new item on the card that's likely to report to the bureaus first.
2. Pay down all current balances except for that new charge.
3. Pay any loan balances to 8.9% or below.

Rinse and repeat the one charge per month thing as mentioned above until the mortgage closes. At that point, you can decide what to do about your accounts.

I'd also suggest checking your mortgage scores as those will be the ones that lenders will use. Sometime soon, you should grab a 3B report from myFICO. This is the best monthly plan:

http://www.myfico.com/Products/FICO-Premier-3B/

Premier 3B will update your FICO 8 as balances change, but it will only update mortgage scores once a month.

Otherwise, you can pull one-time 3B reports, but the cost is greater than signing up for the monthly plan and canceling when you no longer need it. Not knowing the timing on your mortgage, it's tough to tell you the most cost-effective timing for pulling your mortgage scores. But you definitely want to see them before visiting a lender.

[newstart13]

Will Credit Card Companies reduce any fees or interest if you pay off your balance?

[SouthJamaica]

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@newstart13 wrote:

Will Credit Card Companies reduce any fees or interest if you pay off your balance?

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No

If you ask them to do it they might, but they'll record it as a chargeoff and destroy your credit for years.