In four months, my husband and I will be looking for our second home. He is debt-free and his FICO score is in the upper ionosphere, so let's not even talk about him. 
My FICO right now is reasonable (740's) and I'd like to see it go up before we jointly apply for a loan. I currently have one mortgage and one car loan in my name (no missed payments on either, both up to date), and 3 CC's. Balances are $8500, $6000, and $1500. Interest rates on all three are similar, and together the three represent 85% of total credit available.
I have $2-3K per month to put towards the three cards. My question is, what's my best way to pay these down to maximize my score? I know there are several methods I can use to make overall debt go down, but what I don't know is, would my FICO be best served if I paid off the two smaller loans completely, while making minimum payments on the largest one? Or should I apply my $ equally on each three, so that four months from now, each of the three is at as low a percentage of total credit as possible, but all of them still show a balance?
My FICO scores I've bought does indicate that % of credit used is the only area where I don't look good. My history is 19+ years, and I have 5 30-day late payments (most recent in 2008) that still show up.
Thanks!
@Anonymous wrote:In four months, my husband and I will be looking for our second home. He is debt-free and his FICO score is in the upper ionosphere, so let's not even talk about him.
My FICO right now is reasonable (740's) and I'd like to see it go up before we jointly apply for a loan. I currently have one mortgage and one car loan in my name (no missed payments on either, both up to date), and 3 CC's. Balances are $8500, $6000, and $1500. Interest rates on all three are similar, and together the three represent 85% of total credit available.
I have $2-3K per month to put towards the three cards. My question is, what's my best way to pay these down to maximize my score? I know there are several methods I can use to make overall debt go down, but what I don't know is, would my FICO be best served if I paid off the two smaller loans completely, while making minimum payments on the largest one? Or should I apply my $ equally on each three, so that four months from now, each of the three is at as low a percentage of total credit as possible, but all of them still show a balance?
My FICO scores I've bought does indicate that % of credit used is the only area where I don't look good. My history is 19+ years, and I have 5 30-day late payments (most recent in 2008) that still show up.
Thanks!
One way to possibly raise your score faster is to be added as an AU (Authorized User) on one of your husband's cards. It can help you IF the account is older than any of yours, IF the payment history is long and clean, IF the utilization is very low, and IF it will report to the CRA's. Not all cards will do this. You need to ask the company first. You will inherit the entire history of this account. One caveat however; if this account starts to go south your credit will be affected as well. Keep that in mind.
May I ask what the utilization is on each of the cards? FICO not only looks at overall util (you already know that 85% is very high) but util on individual cards.
Optimal credit utilization for FICO scoring purposes seems to be:
Total revolving utilization > 0 and < 9%, the lower the better, and
Reporting a balance on less than half of your revolving TL's, and
Reporting a balance on half or less of all TL's.
There are different opinions on how best to pay down debt. Some will suggest paying off the highest interest account first to save money. Others will say pay off the lowest balance first regardless of interest rate to get that psychological boost. I've used a combination of the two. After getting various recommendations you'll need to decide what you think will work best for you.
7/09 TU-742 EQ- 779
8/09 TU-765 EQ- 783
9/09 EX pulled by lender 802
CC interest free as of 8/09
"Hello my name is Sandy and I'm a recovering crediholic".
