Increasing Score Before Loan Application

[Anonymous]

Hi, I'm new to the forums and just had a question about the best strategy for me to go about increasing my FICO score. I need to apply for a car loan next month due to my current one becoming unusable so I thought I would get my credit utilization down before I apply since my FICO score definitely has room for improvement. My main goal here is to get the lowest APR possible on the auto loan. I currently have a 656 score with EQ and a 663 with TU. I had a small installment loan of $1500 that i just paid off in one chunk in full, and here is a list of the credit card debt I owe:

Card 1: $1561 used of $3100 available

Card 2: $358 used of $800 available

Card 3: $576 used of $900 available

Card 4: $1900 used of $2000 available

Card 5: $0 used of $300 available

That is a total of $4395 of $7100 available credit used for a total of 62% revolving credit utilization. I am currently in a position to pay off all of the cards in full right now and then I plan on going to my local credit union applying for a loan with at least a 20% down payment on the cost of the car. How much could I expect my scores to increase in a month or two if I keep that revolving credit balance at zero?

[haulingthescoreup]

Hi, welcome to the forums!

Go check the negatives over on the left on screen 2 of your FICO reports. What are they, in order?

If high revolving utilization, called "util" here, is #1 or maybe #2, paying off your cards will be a huge help.

If you have other negatives holding down your scores, like lates, reducing your util will help, but maybe not as dramatically.

Do realize that what is reported in almost all cases is the balance due on each statement, not the remaining balance after you pay your bills. So if you wait until the statements post to pay, those high balances will continue to report. One odd fact: your scores will be better if one card reports a small balance, rather than having all five report $0. Pay four off in full several days before their statement dates, and pay off all but $10-20 of the fifth card. Let that balance report, and then be sure to pay off that balance before the due date (this is easy to forget to do, since you've already paid once.)

It will take a full billing cycle for all the new balances to report, and to see the final score result.

If you have no other negatives on your reports, and assuming that your credit isn't ridiculously young, I would expect your scores to be in the 700-720 range.

[Anonymous]

Thanks for the quick reply! On the FICO report I have a 60 day late payment on a credit card that was 2 years ago, a short credit history (oldest account 7 years 7 months/average account age of 4 years, and high use of revolving credit (63%) in that order.

[Anonymous]

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@Anonymous wrote:

Thanks for the quick reply! On the FICO report I have a 60 day late payment on a credit card that was 2 years ago, a short credit history (oldest account 7 years 7 months/average account age of 4 years, and high use of revolving credit (63%) in that order.

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While 7.6 years and 4 years do not constitute a long history, I don't think any lenders would consider it a short history either.  Since that 60 day late, has that CC been fairly active and paid on time, always?  If yes (actually, even if no) you should write a GW letter asking them to remove the late from your CR citing that you have been a good boy/girl since then.  And yes, definitely get your util down as low as possible before apping.

[Anonymous]

Agreed with all the above.  Getting your utilization down, making sure all your cards but one report a zero balance with the remaining card reporting a smalll (<9% utilization), is wise.  And a GW on that 60 day late is a great plan.

Good luck!

[haulingthescoreup]

+2

And hold off until that 60-day is literally over 2 years (= 24 months) old. So if it was Feb 2009, you're OK, but if it was October 2009, wait a bit.