Planning on buying a house in 2-3 years... Advice on Fico scores, etc...

[Anonymous]

Hey gang.  I will give you my story/situation, and hopefully you guys can guide me down the right path with your advice.  Here goes...

Recently, I turned in my vehicle lease and purchased another vehicle, causing several hard pulls on my account.  This lowered my score from 685 to roughly 650.  The finance guy at the dealership gave it to me straight.  He said I have NEVER missed a payment, or made a late payment in my 7+ years experience with credit (I just turned 26), nor have I ever had a collection, etc...  What he said is killing my score is credit utilization, and I can't argue with him.  I have 5 active major credit cards, with limits ranging from $1000-4000, and all of them are utilized at around 80-85%.  I will be coming into a couple of different $4000 payments within the next 6 months, plus I am getting married next summer, which should also get me an additional $7500.  My question is this:  that money would all but wipe out every single dollar of revolving credit that I currently have, but I also want to get a house in 2 years.  Should I eliminate all of my revolving debt, thus putting my credit score into the mid-700s and leave myself with no significant money for a down payment on a house, or should I bank everything I get and just make my normal payments on my revolving credit card accounts?  What are mortgage companies looking for nowadays?  Score in the mid 700s?  Bigger down payments on the house?  Both?  I anticipate that if I don't put all of that money towards revolving credit accounts (the 5 I mentioned) that I can get my score back up to 690-700 when the hard pulls disappear.  What does everyone think is the best road to travel?  Higher score or higher money in the bank?  Thanks for all your advice on this, and feel free to move this to the proper forum, if this doesn't happen to be it.  Thanks again!

[haulingthescoreup]

Goodness, welcome to the forums, and congrats on the upcoming wedding, and the increased cash flow!

I vote for paying off the CC debt, whose interest must be crippling. Then keep the cards open, but only use them for expenses that you can pay off immediately. Think gas and groceries. That will keep your scores healthy. If you can get a better interest rate on your mortgage via higher FICO's, that will be worth it, 30 years of interest later.

As for the down payment for a house, if you don't mind a little mom-ish fretting on my part, I think you'd do better to get in the habit of madly saving a huge chunk of your income to build up your down payment. One thing that happy homeowners find out PDQ is that there's always Something Happening with a house that needs money to pay for it. DXH and I celebrated our 25th anniversary by digging up the entire septic field and relaying it. Well, we actually paid someone else to do it, but instead of a silver anniversary, we had a septic anniversary. While a couple of windfalls are great for wiping out debt, I think that before you and your spouse-to-be start house shopping, you should have established a good track record of saving.

Because the only thing that is a bigger money sponge than a house is a kid.