Paying Large Amounts Down On Credit Card

[Anonymous]

Hello, I am currently house hunting and have been a little too afraid of going to a bank to apply for a loan and hoping to have some questions answered.

Sorry if this is lengthy and uninformed 

About a year ago I applied for a $5,000 auto loan, I checked my score on this website to be a little disappointed with a 658, upon applying for the loan, the bank said my score was 715, quite a big difference, The reason I include this is because since then my score has plumeted to a 619 on this website, One Wal-Mart card was delinquant and inactive, I foolishly just totally forgot about making payments on it because I just stopped using it, I paid the balance down to 0 within a month which boosted my score a little due to a dormant card being active again, but soon thereafter, the creditor closed the account, once again causing my score to plumet. According to myFICO, I have a current score of 618. I've been making on-time payments on all accounts and my score has not changed since about August 

I am hoping someone can give me some encouraging words on if my score will somehow climb, This is what I have done: 

I have an Amazon Store Card with an $800 limit, that I maxed out christmas shopping with a $760 balance on it, luckily Santa was generous and gave me a little money so today, I just paid that down to a $350.00 balance and I plan on paying another $100.00 down on it in about 4 days when I get my next pay check, bringing me down to about a 250.00 balance with about 30% credit being utilized on it. I have never missed a payment on this card. Will bringing this balance down in large chunks like this at least nudge my score the slightest bit upward?

There is a Capital One card with a $3500 limit and $2632 balance, This is my mom's card and I am an authorized user on this account, I have never used this account, I know I am not legally responsible for this debt, but it still hurts my score with it being maxed out, I kind of refuse to put any money into this account to pay it down because It's not my purchases that are being charged on it. If I can get my name off this card, will it be seen as closing an account and further hurt my score? The only thing this has helped is my length of credit history, so will the $2632 debt on my report hurt my score more than shortening my length of credit history is the real question.

Lastly, The $5000 auto loan has about $2,200 left on it, I never missed a payment, and it has a $174/month payment plan. Will paying a little extra each month on this improve my score?

So with the Monthly Payments I have, and my monthly income I came up with:

Monthly Income (Gross, O.T. not included) :  2600.00 / mo. ($3000/mo gross with O.T. included)

Amazon : min. $35 / mo

Capital One: min. $50/mo (Im not sure if I should include this since its technically not my debt)

Truck Payment: $174/mo

Monthly Credit Debt: $260

Total amount in Debt: Roughly $5000.00

Using DTI calculations my monthly Ratio is as follows:

Recurring Monthly Debts: $260

Gross Monthly Income: $2600

Debt to income ratio: 10%

My most recent credit report shows as of 5/22/14 ...3 derrogitory marks (30 day late payments, most recent being 2/2014) and 0 collections, 0 public records.

Am I being too afraid to seek a loan or am I doing the right thing to be cautious, I only have until Jan. 15 to move out of my apartment and will have to be at a motel or mooch off friends for months if I can't be approved for a home loan soon, so I am not afraid of a higher rate, I am more afraid of not being accepted and having to wait longer ... I am looking for a Guranteed Rural Dev loan. because I have little savings for a down payment with having to deal with high rent payments and putting most of my income into rebuilding my credit...saving long term has been very very difficult.

Thanks for reading the novel, and any response will be greatly appreciated!!

[Anonymous]

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@Anonymous wrote:

Hello, I am currently house hunting and have been a little too afraid of going to a bank to apply for a loan and hoping to have some questions answered.

Sorry if this is lengthy and uninformed 

About a year ago I applied for a $5,000 auto loan, I checked my score on this website to be a little disappointed with a 658, upon applying for the loan, the bank said my score was 715, quite a big difference, The reason I include this is because since then my score has plumeted to a 619 on this website, One Wal-Mart card was delinquant and inactive, I foolishly just totally forgot about making payments on it because I just stopped using it, I paid the balance down to 0 within a month which boosted my score a little due to a dormant card being active again, but soon thereafter, the creditor closed the account, once again causing my score to plumet. According to myFICO, I have a current score of 618. I've been making on-time payments on all accounts and my score has not changed since about August 

I am hoping someone can give me some encouraging words on if my score will somehow climb, This is what I have done: 

I have an Amazon Store Card with an $800 limit, that I maxed out christmas shopping with a $760 balance on it, luckily Santa was generous and gave me a little money so today, I just paid that down to a $350.00 balance and I plan on paying another $100.00 down on it in about 4 days when I get my next pay check, bringing me down to about a 250.00 balance with about 30% credit being utilized on it. I have never missed a payment on this card. Will bringing this balance down in large chunks like this at least nudge my score the slightest bit upward?

There is a Capital One card with a $3500 limit and $2632 balance, This is my mom's card and I am an authorized user on this account, I have never used this account, I know I am not legally responsible for this debt, but it still hurts my score with it being maxed out, I kind of refuse to put any money into this account to pay it down because It's not my purchases that are being charged on it. If I can get my name off this card, will it be seen as closing an account and further hurt my score? The only thing this has helped is my length of credit history, so will the $2632 debt on my report hurt my score more than shortening my length of credit history is the real question.

Lastly, The $5000 auto loan has about $2,200 left on it, I never missed a payment, and it has a $174/month payment plan. Will paying a little extra each month on this improve my score?

So with the Monthly Payments I have, and my monthly income I came up with:

Monthly Income (Gross, O.T. not included) :  2600.00 / mo. ($3000/mo gross with O.T. included)

Amazon : min. $35 / mo

Capital One: min. $50/mo (Im not sure if I should include this since its technically not my debt)

Truck Payment: $174/mo

Monthly Credit Debt: $260

Total amount in Debt: Roughly $5000.00

Using DTI calculations my monthly Ratio is as follows:

Recurring Monthly Debts: $260

Gross Monthly Income: $2600

Debt to income ratio: 10%

My most recent credit report shows as of 5/22/14 ...3 derrogitory marks (30 day late payments, most recent being 2/2014) and 0 collections, 0 public records.

Am I being too afraid to seek a loan or am I doing the right thing to be cautious, I only have until Jan. 15 to move out of my apartment and will have to be at a motel or mooch off friends for months if I can't be approved for a home loan soon, so I am not afraid of a higher rate, I am more afraid of not being accepted and having to wait longer ... I am looking for a Guranteed Rural Dev loan. because I have little savings for a down payment with having to deal with high rent payments and putting most of my income into rebuilding my credit...saving long term has been very very difficult.

Thanks for reading the novel, and any response will be greatly appreciated!!

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You need to work on paying those credit cards to $0 or as close as possible before applying.  The utilization is killing your score.  While your moms account might be helping your AAoA the very high utilization is more than offsetting any advantage of the accounts age.  You either need to remove the account from your file or somehow pay the account down. You won't be 'closing' the account but removing yourself as an AU.

Paying extra to your car loan won't benefit you in any way.  Any extra money you have needs to go towards the credit cards in your name. I'd get a more recent copy of your scores as they can change a lot in 7 months and then go talk to a mortgage broker ASAP about your chances for approval.  Your late payments are going to hurt you so that's why you need to get with them to come up with a plan.  

[Anonymous]

One additional factor about your DTI.  You're leaving out the biggest part, the estimated mortgage payment and associated costs.  That's what a mortgage company is going to be interested in.

[StartingOver10]

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@Anonymous wrote:

One additional factor about your DTI.  You're leaving out the biggest part, the estimated mortgage payment and associated costs.  That's what a mortgage company is going to be interested in.

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^^^Exactly right. Also, getting approved for a mortgage with a late payment in the last 12 months will be extremely difficult if not impossible. You have to have at least 12 months of on time payments showing on your credit report. Check your credit report (not score) to see exactly what is going on now. You may need to rent for another 6 to 12 months to get your financial life in order before you purchase.

Get your report at www.annualcreditreport.com

[Anonymous]

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@StartingOver10 wrote:

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@Anonymous wrote:

One additional factor about your DTI.  You're leaving out the biggest part, the estimated mortgage payment and associated costs.  That's what a mortgage company is going to be interested in.

---

^^^Exactly right. Also, getting approved for a mortgage with a late payment in the last 12 months will be extremely difficult if not impossible. You have to have at least 12 months of on time payments showing on your credit report. Check your credit report (not score) to see exactly what is going on now. You may need to rent for another 6 to 12 months to get your financial life in order before you purchase.

Get your report at www.annualcreditreport.com

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Thanks for pointing that out. I should have said that instead of reports. Too often we focus only on score and forget what's actually in our reports.  That would work if creditors never looked any further :-)

[Anonymous]

Definitely dump the AU account. Its really not helping you in any positive manner with it being close to maxed out. Balance management is 30% of your score while AAoA is only 10%. Should be a no-brainer.

Paying extra on the autol oan will not have an effect on your score, but it *will* save you money on interest over the length of the loan. If its a high interest loan the savings could be signifigant.  

[Anonymous]

The only thing that is making me question whether or not I should remove the AU is that it its my oldest line of credit, with it being about 8 years old, the rest of my accounts are either ones I dont use and ones I do use arent very old, WITH that card my history is 10 years, with about an average of 4 years on each account. But if the length of credit history is not a huge factor, I think I will have it removed, but that only leaving the amazon store card as my only active credit account, I'm not sure if it will help much. I know people say to get a secured card or get a small limit card and pay it down to 0 every month and it will help my score, but i really dont want an hard inquiry on my report just before I try to apply for a home loan.

After calling the creditor to have that removed, how can i be certain it will be cleaned off of my reports from the 3 beureus?

And in my first post, I said that I had a 30 day late payment on the report as of feb 14 but i mis-read it .. it was actually feb of 13 so i dont have a missed payment in almost two years

I took the advice and got a new report (equifax only) it still stated i have a dismal 618, but it wasnt showing the more than $500 of my total credit card debt that I paid down, so I just gotta wait it out till that shows up.

Thanks for the tremendous help guys and gals !!

Any more advice, Im all ears, after about a year and a half of decent steady employment and income, I'm starting to find money a lot more interesting than I used to, mostly because back then it was a source for worry but now I'm listening to money podcasts and tinkering around with a 401k, I'm (finally) totally student loan debt free, and building that credit, its challenging but kinda fun, and these forums make it that way!

[RobertEG]

While the AU is still in your file, your score will not be representative of your own credit history, and any prospective creditor desiring to see a scoring of your own history cannot do so.  If you app for a higher primcipal amount of credit, chances are good that they will do a manual review, and see that you score is not representative of your own credit history.

As for paying down revolving % util, a secondary concern is that keeing % util at very high levels over an extended period can make current creditors a bit nervous about potentially increased risk of default.  Thus, as you pay down the balance, they may reduce your credit limit as a way to deal with a perception of increased risk.

Reduction of CL will then result in little or no score improvement as the balance is paid down.

[Anonymous]

So drop the AU account asap then right?

[Anonymous]

I just got my name as an authorized user off of my mothers card. Is it a waiting game for it to be removed from my report of do I need to contact the bureaus to make sure it's not there?