Our financial advisor told us to pay off as much debt as possible before applying for our mortgage. Firstly, your credit score will skyrocket, thereby giving you a lower interest rate on your mortgage. Second, once you obtain your mortgage, you will be more attractive to lenders and get the lowest interest rate possible on the new car. You can't lose with paying down that huge debt. 
What a blessing that you have the means!
Starting Score : 575 May, 2013
Welcome to the forums!
To add to this revolving utilization is penalized harder than installment debt. Both from a FICO and a financial perspective, it's generally worthwhile airstriking the credit card debt in your situation.
If you post your balances vs. limits people can help optimize what you do have reporting, but the general advice of simply paying as much of the credit card debt as you can (leaving a little bit on one card) does pretty well; however, with large debt and presumably a large number of cards, sometimes strategic payments can eek out a few more points than simply writing a check for the highest APR if we're talking short time horizons like mortgage qualification.
@Anonymous wrote:
We are going to try and buy a home in July. We currently have 30,000 in credit card debit:-(
My grandpa died and left me $10,000... This will go immediately to cc debt. Soooo this is where I need help I'm making the wisest decision possible:-) we have a 2 yr old toyota 4 runner.. We can sell it for approx $35,000 and my payoff is $20,000. My warranty runs out in 6 months and about that time I will need to buy new tires:-( thinking I need to sell the car to pay off another 15,000$ in cc debt and try to either lease a car or purchase and try to get a low interest rate.. Credit score is 709... My line of thinking is car debit will look better to lenders when trying to buy a home rather than cc debt !!!!!??!? Thoughts!? Any advice is appreciated!!
Welcome to the forums and I am sorry for your loss. There are so many opinions on what to do, but you seem like you are ahead of the game by at least thinking of a plan and that is great. Without knowing your income ( and I am not asking because it really doesn't matter since you are working to get out of debt regardless). 30k CC debt and a 35k two year old vehicle would be a very different situation from someone earning over 6 figures and someone earning 50k a year.
I would look at it from a what if it were me aspect (and believe me, there was a time I was buried financially and worked through it, learned lessons, and never went there again). IF I didn't have money in the bank for emergencies, I would take whatever makes you feel secure out of that 10k and put it in a savings account or somewhere you have access to it in case, but not too easy if you lack restraint. An example when I started I put at least 1k aside because it always seemed when something went wrong, it ALWAYS costed 1k (weird). Some people will say your CCs are for emergencies and I personally find that silly (well, now I do. I didn't in the past when I did the same thing), but to each their own? If you use CCs for emergencies, is there really a plan for emergencies?
I would take the 9k (minus 1k for emergency) and pay as many CCs off as I could, starting with the one with the lowest balance so it was out of my face and then work upwards towards the next lowest balance, etc. (that's how I learned and did it). Some "experts" will disagree and say that you should pay off the highest interest first. I wouldn't disagree in theory, except, IF I was really that concerned with mathmatics all of the sudden, shouldn't I have been worried about math in the first place? So, that would still leave me with 21k in CC debt.
I agree with selling the car, that's what I would do too. Say it really was worth that much and with paying off the bank, there would be 15k left. I would either take out 5k and buy a used car (I guess depending on driving conditions and use for this to make sense), or maybe even try to use as little as possible to prepay a 2 year lease? I would never lease myself because I put too many miles on a car and also studies show that leasing is the most expensive means to operate a vehicle over time, but it might be an option? The way I see it, there is no way it should take two years to get out of the balance of debt anyway. So, that's 10k left (15k-5k for replacement car) which I would continue where I left off paying off CCs.
Looks like 11k left to pay off? Much better than 30k. I would then work my donkey off making huge payments on the least balance card while making the minimum on the rest. Remember, I bet that the current two year old car (sold) had a 400-500 payment, which would go towards the CC payoff each month. Then before you know it, the debt is gone. Then save save save until 3-6-9-or 12 months of expenses are save away. Then worry about my home purchase.
This is all just my opinion and some will disagree because everyone is different. I hope you work through it because it is not fun being in debt. I was there and then some once. Lastly, just for disclosure. Why am I hear playing in debt products? I believe CCs are good tools when used properly. I have made it my enjoyable hobby to get every penny I can in rewards from them, without paying a penny in interest if I can help it, as well as the fraud security, extended warranties, etc. And many people here are very enjoyable to follow and converse with. Good luck to you.
@Anonymous wrote:
We are going to try and buy a home in July. We currently have 30,000 in credit card debit:-(
My grandpa died and left me $10,000... This will go immediately to cc debt. Soooo this is where I need help I'm making the wisest decision possible:-) we have a 2 yr old toyota 4 runner.. We can sell it for approx $35,000 and my payoff is $20,000. My warranty runs out in 6 months and about that time I will need to buy new tires:-( thinking I need to sell the car to pay off another 15,000$ in cc debt and try to either lease a car or purchase and try to get a low interest rate.. Credit score is 709... My line of thinking is car debit will look better to lenders when trying to buy a home rather than cc debt !!!!!??!? Thoughts!? Any advice is appreciated!!
Sorry for your loss. Lots of decisions to make.
If the 4Runner needs new tires now after two years, how many miles per year are you driving? What interest rate and payment do you have on that loan now? Remaining term? A 4Runner you know from "birth", when maintained properly, is an asset for years. I have one, 11 years now and no plans to look at anything else. Any change in vehicle is going to run you costs that you don't necessarily anticipate and can't control. I would be quite careful about changing vehicles with the intention of using "$15k" to pay down CC debt. You might be able to swing this. I suspect it's going to be much less available free cash at the end of the transition, and if you buy a used vehicle, very likely repairs soon to get it up to a reliable standard. If the annual mileage is what I expect (to go through tires in two years) the lease mileage cap is going to be an issue also.
The 30k (less payoff) of CC debt is quite a lot, but you should review how you gathered that amount. To make a true reduction of it, paying it down while not building up new versions of it is important. It's not easy, but necessary to get a true hold on your finances.
And, as another has posted, a local mortgage broker can give you a good idea how you are positioned for a mortgage, and more direct advice about steps to take.
Good luck!
