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What should I do first? Too many questions at once!

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Anonymous
Not applicable

What should I do first? Too many questions at once!

Hello everyone!  I am new to writing on the forum but not new to reading all the great advice people give here.  So here is my dilemma.  My brain is going in 20 different directions and I'm not sure what I should do first   Then I'm not sure about methods.  So here is a little introduction I guess to start off.

 

I do not have a subscription for the MyFico 3B monthly reports but I did pay on 11/8/17 and here were my results:

 

Fico 8

Equifax 653

Transunion 681

Experian 654.

 

I plan to purchase again 3/1/18.  For right now I follow along with all my scores that come along with my credit card accounts. I compared those scores to the FICO8 and none were exact (which i expected would happen) but they have all risen so I'm assuming my FICO 8 has as well. 

 

So here is my jumbled brain thoughts

 

-I am working on trying to pay down my credit card debt in order to get my DTI ratio down so I can get the ball rolling for a mortgage. 

-I have already started the ball rolling for that mortgage and the only thing holding me is student loans w/IBR payment that FHA won't accept

-I am contemplating on which way to start paying off credit cards, snowball, high interest, little here, little there.

-I have followed advice on numerous threads in the last week or so and I was approved for one card  with 18mo 0% BT, then an offer from a current card for 7mo 0% BT.  I got a CLI on 2 of my cards in the last 2 days and lowered my APR on one of those cards by 1%.

 

So as you can see I have done some work...but now I'm unsure of the fastest ways to raise my score, pay off stuff, and then get the mortgage.

 

All the links, tips, tricks, ideas, would be greatly appreciated.

 

 

Message 1 of 9
8 REPLIES 8
HeavenOhio
Senior Contributor

Re: What should I do first? Too many questions at once!

You can get your FICO8 scores and reports by signing up for a $1 trial at CreditCheck Total, then canceling. You can do that several times if you wish before you decide to pull all of your scores from myFICO.

 

If you list your cards, APRs, limits, and balances, people here can help you with a paydown plan. Given the upcoming mortgage, I'd assume that scoring is a priority over total cost right now.

 

Also, if your mortgage is coming up in the next few months, don't apply for any new credit until the mortgage has closed and you have the keys. Smiley Happy

Message 2 of 9
Anonymous
Not applicable

Re: What should I do first? Too many questions at once!

As far as the mortgage talk.....it is not a must, it is a want.  I live in a condo and my landlord is willing to sell it to me, I am willing to buy for the right price of course.  In the end my payment would be lower than what he is charging me for rent and I've already lived here for 7.5 years. 

 

My cards are as follows:

 

Name                                   Balance                    Limit                   APR                Note

SYNC/Care credit               455                            7500                     0%                apr expires in 13 months

Capital One Quicksilver     508                            1750                    16.15             just pd off another QS and combined the cards

Barclay Arrival                     1100                          3000                    24.49            just got CLI of 700 and lowered interest by 1% by calling in

SYNC/Rooms to go            1250                         4500                      0                   apr expires in Nov 2022

SYNC/Walmart                    1800                         4000                     23.9              just got CLI of 2000

NFCU Platinum                    2448                         2700                      0                   apr expires in 8 months

Grow Financial Platinum    4735                         5000                     10.9

Old Navy                                   0                             350

American Eagle                       0                             500

Discover                                   0                             1500                       0                  just got approved for this card, with 0% for 18 mo w/BT

NMAC   (my auto loan)      18782                       31218                   1.9%

 

I also have approximated $69k in student loans on an IBR payment plan of 115/mo and $6,900 in Direct Plus loans that are in deferrment until my son graduates from college May 2019.

 

 

Message 3 of 9
Kree
Established Contributor

Re: What should I do first? Too many questions at once!

Great news, you aren't far above 28.9% utilization. If you can pay down under that line you will see a good bump in scores.

 

Try to pay down any card over 68.9% first.  This will also give you score increases.

 

EDIT: corrected 68.9 from 58.9

Message 4 of 9
HeavenOhio
Senior Contributor

Re: What should I do first? Too many questions at once!

The generally accepted FICO thresholds are at 8.9%, 28.9%, 48.9%, 68.9%, and 88.9%. They're something you can keep in mind as you pay things down. These apply both to overall utilization and individual cards. 8.9% maximizes your score. 28.9% is considered responsible borrowing. 88.9% is maxed.

 

Getting below 88.9% and 8.9% are almost certain to help your scores. Crossing some of the thresholds in the middle will probably help too. But bank on only some of them helping your score. Which ones would depend on your profile, and the ones that would be helpful are hard to predict.

 

Another scoring factor is the number/percentage of cards reporting non-zero balances. To start with, you'd want non-zero balances on less than half of your cards. One card with a non-zero balance is ideal. You don't want all cards with zero balances as that will ding your score.

 

From a scoring and financial (interest) standpoint, you're definitely best off attacking your cards rather than the loan. That's going to save you money on card interest, and it will bump your scores and hopefully land you better a mortgage interest rate.

 

From a DTI standpoint, paying down the car loan — without paying it off — would be more useful. That's because when computing DTI, minimum credit card payments are used rather than full balances. I'd submit that your car loan is probably in a good spot; we rarely hear about reasonable car loans getting in the way of mortgages. The reason for not paying the car loan fully off is that scores are dinged for no open installment loans.

 

There are two things we don't know: when a mortgage might occur and how fast you'll be able to attack your debt. Maybe you can give us an idea. Without that information, I'd suggest attacking the two cards with the highest APR first. Because the balances aren't among your highest, that would also have you snowballing a couple of cards. If you smell the mortgage coming on, you can shift gears toward the high-utilization cards.

 

You might want to consider a balance transfer from one of your high APR cards to your new Discover card. I'd try to keep utilization on the new card at 48.9% of its limit or below.

 

After you've had the Discover card for a couple of months, check in periodically for the availablity of limit increases. They'll be soft pulls and won't count as seeking new credit before applying for a mortgage. Discover has no rhyme or reason when it comes to approving or denying CLIs, and you don't reset any timetables by making requests. If there were a timetable, I'd suggest holding off on CLI requests until your card debt had markedly improved.

 

Someone else is likely to chime in with a different plan of attack. That's good as it'll give you a smorgasbord of ideas to choose from. Smiley Happy

Message 5 of 9
Anonymous
Not applicable

Re: What should I do first? Too many questions at once!

That is a great amount of very useful knowledge! I appreciate it a lot! Time to crunch numbers when I get home!
Message 6 of 9
Anonymous
Not applicable

Re: What should I do first? Too many questions at once!

You couldn't ask for a better guy to work with than Heaven.  All his thoughts have been great.  (He's also a good writer.)

 

I like especially his advice about working on cleaning up your reports and using your FICO 8 scores as a periodic proxy for your mortgage scores.  Get all your reports looking perfect, which may take several months, and THEN pull your mortgage scores.

 

Heaven writes the following:

 

From a scoring and financial (interest) standpoint, you're definitely best off attacking your cards rather than the loan. That's going to save you money on card interest, and it will bump your scores and hopefully land you better a mortgage interest rate.

 

From a DTI standpoint, paying down the car loan — without paying it off — would be more useful.

 

The text in red can only be understood in the context of the text in blue taking priority.  Basically you want to get almost all your CC debt paid off.  The situation where you'd want to have a lower balance on a loan compared to your cards is one out of a thousand.

Message 7 of 9
Kree
Established Contributor

Re: What should I do first? Too many questions at once!

How does paying the car loan down help with DTI?  I thought car loans take off the backend, so you still have the same monthly payment, just less of them.

Message 8 of 9
Anonymous
Not applicable

Re: What should I do first? Too many questions at once!

Ok so now that I am home and playing with numbers I want to make sure I’m following this correctly and answer your question about the mortgage.

The mortgage is not a rush because I have been renting the same place for the last 7 years and approached my landlord about wanting to buy it and he said he would sell it to me. Win-Win! But he knows that I am working on raising my scores to get a better interest rate.

Now about the thresholds.....and my current status. Let’s say for easy numbers I have $1,000 to pay towards these cards. Do I split it up among cards or should I pay something off like capital one ($500) and the other $500 towards another high interest card or pay all towards something that is above the 88.9% threshold?
Message 9 of 9
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