Need To Increase My Score To Buy a Home

[Anonymous]

4 years ago, with a FICO of 800+, I had medical expenses that caused me to be late on several CC payments and a car loan and default on one Bank line of credit for $1400. Since then, I have payed all bills on time and brought all my CC down to $0. I still use my CC but pay the the balances before interest can accrue and only use < 3% of limit.

Current FICO scores:

TU 701

EQ 688

EX 698

Current CC and Auto loan:

Visa - limit of $13,000, balance $147

MC - limit $11,000, balance $322

Car Loan (3 years on $30k) owe: $10,000 I plan on paying this off in full by next March (7 months before needed)

2 store cards I haven't used in years

Question:

I want to buy a home in the next year and would like to increase my score to obtain the best rate. Please tell me how I should use my CC: should I use them every so often and pay before the statement close date? Should I use them more often and charge larger amounts? Should I pay the balances off before or after the statement closing date?

Thank you.

[llecs]

Welcome to the Forums!

I moved your post over here to get a better response.

On the current stuff, you are in good shape. A month prior to buying the home, you'd want one of the revolving CCs to report $0. You may see a little increase there. Everything else is fine and don't app for any new credit between now and then (other than for a mortgage). It doesn't matter how you use the CC. FICO cares about utilization and you'd want a balance to report less than $1300 and $1100 respectively. But it doesn't matter to FICO so as long as you keep the balances down by then. The only other factor besides mix is history, and you can't do anything about that, other than to pay on time. BTW, I'd continue the car loan as scheduled. Paying it off before then could possibly lead to a small decrease.

You should tackle the baddies though. That is what is holding you down. I'd venture a guess that your score won't increase more than 10-15 points between now and then. Those lates are haunting you. Check out Rebuilding Your Credit for info on that.

[GFer]

You might want to check and see if those store cards have been closed due to inactivity. If not--use them every few months for something small and then turn around and pay it right off.

If they aren't used they aren't counting in your utilization. You might initially take a ding for a dormant card, but that will go away quickly. The more positive lines the better. And of course, you always want less than half of your accounts reporting balances. So with you only having the two active (the visa and mc) you might only let one report a balance and see what happens.

llecs is right about the baddies. Paying off old baddies will not help your credit score, believe it or not. Fico will see it as more recent. But upon manuel review it looks good (especially for buying a house).

llecs is right about taking a hit in points by paying your car off, because you will then have less than the ideal mix for scoring purposes. However, do keep in mind that any loans that have less than 10 months worth of payments left will NOT be counted in your DTI ratio and therefore give more wiggle room in the price of house you can afford!

Just keep making those payments on time and you'll be golden! Good Luck!

[Anonymous]

Given your post, there's no magic bullet to increase your credit score. No matter what you do here, won't impact you unless you run up balances.  The bigger question is:  are you sure you want to buy a house?  Are you ready??  

1.)  Do you have 6 months of salary in a liquid savings account?

2.)  Do you have a 20% down payment not included in #1?

3.)  Do you have an extra 10k to furnish your new home?

If you answered yes to all of the above, then read this website:  http://www.patrick.net

[MattH]

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@Anonymous wrote:

Given your post, there's no magic bullet to increase your credit score. No matter what you do here, won't impact you unless you run up balances.  The bigger question is:  are you sure you want to buy a house?  Are you ready??  

1.)  Do you have 6 months of salary in a liquid savings account?

2.)  Do you have a 20% down payment not included in #1?

3.)  Do you have an extra 10k to furnish your new home?

If you answered yes to all of the above, then read this website:  http://www.patrick.net

---

All very sensible advice.  And here is something OP can do right now to improve the odds of successful home ownership: open a new savings account, and every month deposit into that account the difference between current monthly housing costs versus monthly cost of ownership.  If OP can do that each month without fail for a while, then (1) the money in that account can serve as down payment or reserves and (2) OP has increased confidence the purchase makes sense.  If OP finds it difficult to deposit the planned amount on schedule, then OP has learned something very important without risking disaster.  The monthly amount to deposit should be calculated from a realistic estimate of what ownership will cost, including not only mortgage principal, mortgage interest, and property taxes, but also maintenance (if my toilet broke when I was a renter I called the super, but now I fix it myself if I can or I call a plumber), possibly owners' association common fees, and a reserve for surprises.  Over, say, five years of owning a house there WILL be some surprises and therefore in an ordinary month the owner must be putting away some funds towards the next surprise (whether that be a new furnace, a new kitchen stove, a new water heater, or whatever).  Also, OP should not forget utilities on a detached house will likely be more than utilities on an apartment (of course, if OP currently rents a house then OP already knows this).