What to pay

[Anonymous]

I have $3,000 in revolving credit - and now the ability to pay it off - this should seem like a no brainer but I also have $8,000 in installment loans and I am not sure if I should pay off all of the revolving or spread the 3K over all of the debt.  I want to refi a house in a month or two and also feel like maybe I should put some of the $3k toward emergency fund.

Opinion?

[MidnightVoice]

I am sure others will chime in later, but high utilization of reveolving debt does more damage to your scores that installment loans.  And if you are refinanciong, a better credit score might well get you a better loan.  A utilization of 1-9% of your revolving credit is ideal.

What range are your scores?  Are they in a region where a point increase would get you a better mortgage rate?

[SmartCookie]

Ditto to the above.  With your refi timeline, I'd pay off the credit card now so that it would have time to report, and leave your installment payments as is.  I'd worry about starting the emergency fund after all is said and done.  

[Anonymous]

Thanks so much for the advice - so you suggest knocking out all revolving not just 50% or below?

I would LOVE to become debt free over the next 4 months

The other issue that I have - finding with refi is that I am a - so  1099 and do not have a full 2 yrs. yet - this seems to be making it difficult for me as well.  My current mid score is in the high 600's about 667

I go brain dead when talking about mortgages, points, etc. etc. this is terrible but all I know is that I am paying a HUGE rate because of an ARM that has now jumped.  So - yes - the revolving debt or lack there of could make a difference and push me up into the 700's I assume?

[SmartCookie]

I don't know exactly how much it will boost your scores, but yes.. the more you get that credit card down the more your score will go up.  50% is better than what it may be now... but it would still be very high utilization.  I know it should go without saying but make sure your credit reports are the best they can be in regards to eliminating or improving what's already on them for other accounts.  Every bit helps.

There are a few really good morgage people around that can help you further with the refi details.   Also, as far as your upcoming emergency fund plan... hsbcdirect.com has a great online one... one of the top yields.  FWIW, opening an account and throwing in just $10-20 bucks might give you a mental boost... and it will be there when you are ready to pad it down the line.