Need suggestions please

Anonymous · ‎02-09-2017

I checked my FICO scores they are EQ- 575 EX-610 T- 627 but I also read that mortgage companies use the FICO 5 which is 499 on EQ ,506 Ex, 545 T !!??!?!? Please explain that!

We are really wanting to buy a house this year! But my current situation is I am an Authorized user on my husbands 2 Capital one Card CL-500 and 400 at the current moment they are maxed out , but thats where our question is do we pay them off to a zero balance or to 10-30% ? Also we have 2 personal loans together with a balace of 3000 and 2500 that we were going to pay to eliminate that debt , but will this hurt our score or should we just pay some down on it or pay off?? Other than that all I have is our vehicle payments on our credit and a few medical bills. I was also told I needed to get a secured credit card and put 200-300 on it and not use. I just want to do the right thing and not hurt my score even more. Please any advise!!!

Appleman · ‎02-09-2017

There are various FICO scores that lenders use which 'weight' certain aspects of your credit portfolio differently. These formulas are not public information but many on this board have a reasonable idea about how each score is affected by various items.

Maxxed out credit card: reporting a balnce greater than 90% of the credit line. This is bad in the FICO models and eyes of the lender. It shows you are likley living beyond your current means. Below 30% utilization and you will see improvement, below 10% and you could see even more benefit for scoring purposes.

You can use the credit cards but pay in full each month, in your case I would pay the minute the charge hits the card. That way when the credit card generated the next statement it reports the balance as $45 or less on a $500 credit line.

If you pay off the 2 personal loans, that is correct, your score will go down. But do the right thing for your finances. If you are paying 20% interest on a personal loan it is not likley worth keeping open. You could always do a shares secured loan. Basically, you deposit money and take a loan against the money. This will show up in the reports as an installment account.

Do you have any late payments? These are killers for a good score. Even one late payment can seriously tank a score. ALWAYS pay on time.

Are there any collections? Also a very bad thing for scores.

Remember, the scores are there to help the lender do risk based pricing of their loan products. The better the score the better the interest rate and terms.

The first reccomendation would be to find a budget program to use so that you stop generating new debt. Once you get the debt under control and have been making payments on time your scores will climb. Buying a house is a great goal, but with the current scores it will be difficult.

SouthJamaica · ‎02-09-2017

@Anonymous wrote:
I checked my FICO scores they are EQ- 575 EX-610 T- 627 but I also read that mortgage companies use the FICO 5 which is 499 on EQ ,506 Ex, 545 T !!??!?!? Please explain that!

We are really wanting to buy a house this year! But my current situation is I am an Authorized user on my husbands 2 Capital one Card CL-500 and 400 at the current moment they are maxed out , but thats where our question is do we pay them off to a zero balance or to 10-30% ? Also we have 2 personal loans together with a balace of 3000 and 2500 that we were going to pay to eliminate that debt , but will this hurt our score or should we just pay some down on it or pay off?? Other than that all I have is our vehicle payments on our credit and a few medical bills. I was also told I needed to get a secured credit card and put 200-300 on it and not use. I just want to do the right thing and not hurt my score even more. Please any advise!!!

1. If you have 2 credit card accounts let one report at zero and the other at $10.

2. If you have 2 personal installment loans, don't pay either of them off completely at this point; just pay them both down to 5% to 9% of the original amounts of the loans.

3. Make sure your medical bills don't become collections.

4. Pay your vehicle payments down as much as possible but not to zero.

5. Do NOT apply for any new cards or anything until after you've closed on the mortgage.