Debt Consolidation prior to mortgage

[Anonymous]

Hi all, I'm wondering about the best way to approach debt consoliation given the following circumstances:

I've got two CCs. Each has a $10k balance and $16k limit. They have a 7% and 17% interest rate, respectively. I would like to pay them off. My car also was recently totaled and I had $6k of a $12k loan remaining, which the settlement paid off in full, so I don't owe anything there, *but*, I need to get a new car, so I'll likely have a new loan (~$12k) for that. I'm also looking to mortgage a house in Jan/Feb 2016 or so, so want to preserve the relatively high amount of liquid cash I have for that. I have solid income and good credit so can get decent APRs on loans.

I'm wondering if it makes more sense to a) just make payments on the cards over time, but suffer from having a 17% APR on one, as well as high utilization, especially as I get closer to having a mortgage, or b) take a small personal loan (whose APR would be fairly low), pay off the cards, and then pay off the loan with the money that would otherwise have paid off the CCs? Just a little lost as to how to weigh the different approaches (or if I've missed one entirely) in terms of their effect on my credit score and also how it would affect my mortgage prospects. If the mortgage weren't so close, I'd just pay them off over time.

I guess in a sense I'm replacing one debt with another (CC vs. loan); which debt would be "worse" in terms of my credit, debt-to-income ratio, etc.?

Thank you!

[Anonymous]

You mention that you have good credit and so can get decent APRs on loans.  A few questions that may help you clarify how you went to move forward:

Are your credit scores so good that, even right now with your relatively high credit card utilization, your scores are high enough that you are confident that you could secure the best terms on a mortgage?

Or are your saying that your scores are good enough now that, assuming that you were to give them a boost by paying off your CC debt, then you could get best terms?

I notice too that you say "decent" terms but not best.

My own advice is that the mortgage should be the thing that drives everything.  You want to be certain to secure best terms because in the long run that will save you the most money (since this will be a huge purchase, compared to a car say).

Have you done a mortgage pre-approval recently?  If so, we may be help to help more if we can know your mortgage FICO scores (different from the standard FICO 8 scores) and also what your CC debt debt was at the time they were pulled. 

I am leaning toward suggesting that you look around for a good rate on a personal loan and pay off the entire CC debt with it.  Interest rates may well be going up soon so now is a good time.  But it's hard to give you the best advice without knowing more about your scores and profile.  If you happen to know the total number of accounts you have on your report currently (closed and open) and your AAoA, that will also help people gauge how much impact the two new installment loans (car and CC-payoff) will have on your score (bearing in mind that paying off your CC debt will also give you a major boost).