Pre-Approval Conditions

[onamission2013]

So we have been pre-approved for a house with the condition that we pay off 3 tradelines to reduce the DTI.

The only debt we have is the following:

Car Note

ChildSupport

Small Bank Loan with 3 monthly payments left.

Credit Card 1 $17 min payment.

Credit Card 2 $22 min payment.

He wants us to pay off small bank loan and both credit cards to reduce DTI.

Our mid score is 648.  Im so scared that if we pay the loan and the credit cards off that it will drop our score under 640.  Does that happen?  I thought it would hurt your score if you paid off your credit cards in full.

[StartingOver10]

No, right now you are showing two credit cards with balances. How large are your balances as a percentage of the individual credit lines and as a percentage of your overall revolving lines?

Pay one off to zero and leave a $5 balance on the other one if you want to maximize your score. I say $5 because it is a non-zero amount and close enough to zero that you satisfy the condition but still show a balance so that your score will be maximized. How many revolving lines do you have?

[onamission2013]

The only credit we have is our car loan 20k, the small bank loan with a balance of 300.00 and the two credit cards $17 and $22 balance.  So we pay off the bank loan and credit cards that takes out our current credit and leaves us with only our car reporting.   Credit Card 1 $200.00 secured card $17 balance.  Credit Card 2 $300.00 secured card $22 balance.

[DrMac210]

Not sure how much paying those down are going to help the DTI.  I'm pretty sure if there are only three payments left on the loan they shouldn't be calculating that into the DTI to begin with.  I would think the auto loan payment would be hurting more than anything.

How much of a loan are you getting and how much do you make?

[StartingOver10]

Did the LO pull your report or did you tell him you have a $17 min payment and $22 min payment?   When I saw the word "min payment" I assumed a larger balance, not that you PIF and let those balances report each month.

Was the LO trying to work with your score or your DTI? If it's your DTI than the poster above is correct, your auto loan and installment loan will make more of a difference in your DTI.

[rckstrscott]

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@onamission2013 wrote:

So we have been pre-approved for a house with the condition that we pay off 3 tradelines to reduce the DTI.

The only debt we have is the following:

Car Note

ChildSupport

Small Bank Loan with 3 monthly payments left.

Credit Card 1 $17 min payment.

Credit Card 2 $22 min payment.

He wants us to pay off small bank loan and both credit cards to reduce DTI.

Our mid score is 648.  Im so scared that if we pay the loan and the credit cards off that it will drop our score under 640.  Does that happen?  I thought it would hurt your score if you paid off your credit cards in full.

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If you pay off your credit cards in full, it will definitely hurt your score a little. FICO scores do not like to see 0 revolving balances..  You util on those credit cards are fine, you will not see any score increase. HOWEVER; you will see a DTI help becuase those two payments will not be showing in your DTI -- so I mean; it is a real crap shoot. Sounds like the LO wants to get rid of those two min payments, but yer score is soooo close to the threshold you might be in danger

Tough call; but if you don't pay off the cards and the LO won't approve you, the score is irrelevant anyway

-scott