PLUG AWAY OR OBTAIN SIGNATURE LOAN

[Anonymous]

Hello Friends,

I would like to ask for your advice.  First, I will give some basic info.

1.  BK filed and discharged May 2013

2.  Trans Union Score 669

3.  Equifax Score 652

4.  Experian Score 659

5.  Have obtained preapproval from mortgage lender.  (House is being built and loan will close when construction is complete)  ***this is not a construction loan***

Obviously, we have rebuilt our credit somewhat since the BK.  I have 8 credit cards

Wal-Mart $650 credit limit - $0 Balance

Younkers $900 credit limit - $350 Balance

Capital One $1750 credit limit - $150 Balance

Capital One $1500 credit limit - $130 Balance

Speedway Gas $400 credit limit - $0 Balance

Credit One $600 credit limit - $0 Balance

Citi Bank $1500 credit limit - $140 Balance

Credit Union Credit Card $5000 credit limit - $4800 Balance

As you can see, I have worked hard to get most of the cards at or below 10% utilization, or, paid in full.  Our mortgage lender recommended we work on getting all of the small ones below 10% to see the biggest score bumps.  So far, that has worked fine.  I currently have a $4500 signature loan through my credit union.  The payment on that is $264 per month with 12% interest.  That loan is 18 months old and is only a 3 year loan total, hence the higher payments.  I am considering taking out a loan to satisfy that signature loan and the balance on the credit cards, leaving me with one payment over 5 years.  I am thinking that this will lower my utilization on the credit cards and give me another bump in score.  However, I am concerned that closing an 18 month old account would negatively impact my "age of accounts" section on the bureaus.  My payment on the new loan would be about what I am paying on the current signature loan.  Plus I wouldn't have the additional credit card payments.  I am just wanting to know if you think this will negatively affect my score in the short term.  We are expecting to close on our mortgage in mid-september so I cannot afford any long term "drops" from making this move. 

Your opinions are welcomed.

Thanks

[CH-7-Mission-Accomplished]

Don't do it!  Do not open a new installment loan while you are waiting to close.  Paying off the old one could drop your scores 25 points and it is not clear how many points you will gain from the lower credit card balances.

That said, I would pay off the $150, $140 and $130 balances on those three cards and then by all means get that credit union card down below 90%.  You are currently at 96% of that credit limit.  Over 90% is a big hit on your scores.

Then let that one account with like $300 owing on the $900 credit limit continue to report.

If you could only do one thing, pay down that one card to below 90% of its limit, and/or ask the lender to increase the limit (only with a soft pull).

In fact you should ask for soft pull limit increases on all your credit cards.

[takeshi74]

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@Anonymous wrote:

As you can see, I have worked hard to get most of the cards at or below 10% utilization, or, paid in full.

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That's great but you need to continue.  4800/5000 is 96% which is maxed and hurting you.

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@Anonymous wrote:

5.  Have obtained preapproval from mortgage lender.  (House is being built and loan will close when construction is complete)  ***this is not a construction loan***

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Keep in mind that the general advice is no new credit 6 months to 1 year prior to a mortgage.  If it doesn't close until construction is complete then don't open any new accounts until then.

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@Anonymous wrote:

However, I am concerned that closing an 18 month old account would negatively impact my "age of accounts" section on the bureaus.

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The concern over lowering AAoA should be focused on opening new accounts.  This thread is linked in the Helpful Threads sticky in the Credit Cards subforum.

http://ficoforums.myfico.com/fico/board/message?board.id=creditcard&thread.id=117125&jump=true

[Anonymous]

Wow, I called Capital One and asked for soft hit increases. Both cards were increased by $2000, adding $4000 to my avail credit and thus lowering my overall utilization. Thank you for that suggestion.

In your opinion, will that increased limit affect my scores?

[CH-7-Mission-Accomplished]

Thiis will help your scores by lowering your utilization, but again, you need to get that one account down below 90% usage and pay off some of the other smal balance accounts.

FICO likes to see a balance on only card.  Ideally that one card would be at 30% of its limit, but in your case getting all paid off but the CU card and getting it down under 90% will help the most.

[Anonymous]

Thank you for the responses.  I am redirecting the payments from the "zero" balance cards to the larger balance.  This should help reduce the balance owed a bit faster and help my utilization. 

Thanks again for the responses!  Greatly appreciated.