Secured Credit Card Utilization

[rcolombe]

Hello Everyone.

I am working on getting my credit up for a good interest rate on a new home.

I recently got two secured cards to help. 

One card has a $300 limit and the other is $400.

Is it best to keep usage under 30% per card or total on the two cards? 

Also, is it better to pay off the full balance evry month? 

Money in the bank is not a problem for us, it's our credit scores. So paying off the cards every month can be done.

Any suggestions?

[Anonymous]

Sure, the folks here will be glad to help you.  A few questions:

       Can you tell us what your time frame is for your new home? 

       Can you confirm that these two secured cards are your only credit cards?

       Do you have any installment loans of any kind?

I am going to assume that you won't be buying a house for the next six months -- that you are just preparing for the home purchase during that time.  (Do let us know your best guess, however, as to when you would like to close on a home -- ideally.  Let us know especially if it might be sooner.)

The first thing I would do is start using your credit cards.  It could be as little as $5 on each card each month, but do use them for something.  Given the low credit limits that you have, I'd keep your balance low: a total combined debt of < $60. 

Make sure that exactly one card is reporting a positive balance and all the rest are reporting $0.  It's OK if you use the cards that you want to report $0, but just make sure you pay them to $0 well before the statement prints.  The card that you want to report a positive balance you should keep at a low but positive balance and then pay it in full a few days after the statement prints.  A good goal would be for the card with the positive balance to always report in the vicinity of $10-30.

[rcolombe]

I'm looking to start on a home loan within the next 4-5 months.

These are the only active cards. The rest are closed or at a zero balance.

We have our current home loan and car loan.

So you're saying to keep all the cards at zero, except for one?

[Anonymous]

Yes, all cards at $0 except one.  Your total utilization (counting all credit limits together) also needs to be < 8.99%.  It's simplest though if you make that one card show a small balance (like $10 or $20 say).  FICO will round that up to 1%.

How many open credit cards do you have?  That includes cards that have a $0 balance (as they as they are not closed).

[Anonymous]

Have you pulled your credit reports?  Your scores are low, so I suspect that you have derogatory or negative information on them (lates, chargeoffs, collections, etc.).

[rcolombe]

Currently I have 2 cards with a zero balance and the two secured cards with a zero balance. 4 total open cards.

The negative info is from creditors that I have paid off. Some I have managed to get deleted and others are more stubborn. 

[Anonymous]

My advice:

1. Keep working on removing the negetive tradelines. Usually this will have the most positive impact on your score.

2. You have enough credit cards, so no more applying.

3. CreditGuyinDixie is on point.

This is pretty general as advice, as the condition and specifics of your FICO mortgage scores have not been shared. I would like to add I am in no way an expert. There are a boat load of more knowledgable individuals on this forum than myself.

[Anonymous]

Three cards reporting $0 and one card reporting a small balance should give you a substantial boost over all cards reporting $0. 

Four credit cards total is plenty when preparing for a mortgage.

I would start by using each card once, letting it report, and then paying it inf full after the statement prints.  Once is probably enough for that.  I am only suggesting that because Fannie Mae's software is looking now to see whether you have created a history of something called being a "transactor" on each credit card.  If for some reason a card has been standing at a $0 balance for a long time, this would be worth doing IMO.  Then after that I would do what I suggested before: three cards reporting $0 and one card reporting $10 every month.

Once your cards have been reporting with that Three-Zero One-Small pattern for a couple months, be sure to pull all your mortgage scores at myFICO to see what they are.  Your mortgage scores are not the same as your FICO 8 scores.  While you are getting your CC balances in shape, see if you can get more help with your derogs.  You can try the people over at the Rebuilding forum, or contributor Brutal Body Shots may have some time to assist you.

[Anonymous]

PS.  In the first half of this thread, the language you use implies that your cards have a positive balance but you want to know if it will be sufficient to keep them under 30%.  You also say that you paying off the cards each month can be done if it is needed -- also implying that your cards are not yet paid off but that you are willing to do so if that is what we recommend.

In your last post, however, you indicate that you have four credit cards total and that all of them are reporting at a $0 balance.

Which would you say is the best description of where your CCs are right now?