Urgent Help Needed: Another Utilization Question

[Anonymous]

I will try to be brief and not whine about my current situation.  I need some advice regarding where to apply a finite amount of cash with the objective being to increase my score to a lender's minimum in the shortest amount of time.  I am a late bloomer, and have never taken my credit as seriously as I should.  Coupled with a very scatter-brained last 12 months (well, 3 years really) I need some help making the right decision to get the desired effect.

There is a list that is rather long about how I got into my current situation.  Anyone who would like to take this opportunity to reprimand me for past behavior (as I saw in some other threads) should be prepared to have the story posted here thereby making you look like a completely insensitive jerk.  As a community you all seem to be respectful as well as knowledgeable and I'm looking forward to combining your answers into some mashed up good advice.  Thanks in advance!

My credit score (or FAKO score, as I've been educated here to realize) has bounced around for the last year between 574 and 631.  It does this in one month, which kind of gives me some hope that the actions I take might have a rather immediate impact to my score.

I have received the proceeds from an estate, of which I have about $20,000 that I can hurl at my problem, still leaving me enough funds to live through closing on an FHA fixed-rate mortgage.  I live in an expensive area with an award winning school district; necessary as I am solely parenting two children, one of which is autistic.  I live in an apartment above an elderly couple, and the wife is truly bugged by my autistic son's noise, so much so that she wrote a letter to the property management company complaining.  Consequently they did not renew my lease at the end of May.  I was closing on the estate at that time, and they understood that moving an autistic youngster 1 month before school was out probably wasn't good for our health, so they've let us stay (increasing my rent a quite a bit) on a month-to-month basis until I can get us moved into a home of our own.  I have been told that it's being reviewed monthly, so if anything goes wrong I am out the door on my keister with kids in tow.  Nothing like some pressure!!  'Nuff said about that.  

I was busy enjoying the fact that for the first time ever, I was close to being able to get my score above 640 and allow me to qualify for commercial financing on a mortgage.  Enter scatter-brained me, who missed not just 2 payments in a row on one card, but went overlimit on a really low balance card in that second month.  Voila! Back to 574 right when I was getting ready to apply the estate proceeds in a general way and nudge my score up.  Consequently I need a fairly quick fix.  The clock is ticking on the Mrs' dresser downstairs

I'm going to post some very detailed information here, in the hopes that I can get some very detailed understanding about how to apply this money.   I'm an extrovert, but this makes me a bit nervous!  So, here we go.

The summary portion of an end of May credit report (that I hadn't read because I thought everything was fine - what a dork!):

*Data contains information reported to Experian within the last 6 months.

Count of Records            

Total Accounts  13

Hard Inquiries    2

Public Records   0

Account Types*               

Real Estate Loans             0

Installment Loans            1

Revolving Credit Accounts           5

Credit Cards       4

Retail Cards        1

Negative Information   

Accounts Listed Negative             6

Accounts in Collections                  0

Time Since Negative                       0.0 Years

Current Negative Status                 None

Most Negative Status                    60 Days Late

Debt Summary*              

Real Estate Debt               $0.00

Installment Debt              $8,085.00

Revolving Debt$39,560.00

Total Debt                           $47,645.00

Monthly Payment           $987.00

Revolving Credit Summary*       

Revolving Credit Limit                    $40,400.00

Revolving Credit Available            $1,246.00

Revolving Credit to Debt Ratio   3%

Length of History            

Oldest Account                 15.9 Years

Average Account Age    9.0 Years

Gory details:

type	status	limit	bal	paydown?	new bal	current util	new util
cc	closed	0	2,837	2,837	0	inverted!	0%
cc	closed	0	2,055	2,055	0	inverted!	0%
cc	closed	0	1,038	1,038	0	inverted!	0%
cc	open	500	457	457	0	91%	0%
cc	open	6,300	6,148	4,300	1,848	98%	29%
cc	open	30,100	30,061	9,000	21,061	100%	70%
cc	open	500	0	0	0	0%	0%
		37,400	42,596	19,687	22,909	114%	61%
auto	open	33,000	7,538	0	7,538	0	23%

So, what I can't figure out is this:  

• Is it better to get the high bal/util one individually lower, or pay off the closed accounts?
• BTW the high bal cc has the lowest interest rate of all items listed except auto loan
• If it was your 20k, where would you put it?
• What (roughly) kind of a difference should I see if I do this or whatever you recommend?
• I need to see a change very soon - will there be any immediate impact to my score at end of June if I make these payments on 6/20?

I'm very worried about this and I really appreciate your time if you've stuck with me to the end of this epistle.  Thanks!

[dp321]

It seems pretty clear to me that you just need to allocate as much money to your credit cards, while keeping enough of it for emergency such possible moving or down payment on the morgage. Since the number of accounts showing ultilization affect your score as well, best bet is to pay off the two smaller credit cards and pay off as much as possible on the bigger card. As least get your cc ultilization below 50% because that seems to be a big tier. Ideally you want it to be below 10%, but that would wipe out your whole estate proceeding, leaving your vulnerable for future credit abuse.  

Your credit score don't update until your credit card companies report your new credit card usage. You must time this well. In my experience, cc companies report your balance to the bureaus within a week after the statement closing date (not your payment due date). So I would pay the cards, not put any more charges on them, wait till a week after the statements close and check your score again. I use Credit Karma to check if my credit cards report to the bureaus - it soft pulls transunion. It shows its FAKO score and a little bit credit details. You can update it once everyday for free. Most importantly, it shows your credit ultilization (compare this against your calculation). This way you can know your cc company reporting time down to the day.

Do it and you should see a substantial increase on your score. If you want to look at your fico score, wait till the optimal time I specify above and sign up for the 10 day score watch trial here - be sure to cancel it 3 days before the 10 day limit.

[RobertEG]

I will offer a slightly different "spin" on how to use funds to obtain credit score improvement.

Yes, % util is important, but just as, if not more, important is cleaning up old derogs in your CR.  $$ may enable you to do that, and get more score increase than simply throwing it all at a reduction of % util.  Elimination of old derogs can have significant FICO impact,depending on their age, severity, and number.

For each of your accounts, both open and closed, what derogs and delinquencies are reporting?  For accounts still carrying a balance that have prior reported delinquencies, you may be able to use the extra $$ to make PFD offers, and thus secure the deletion of some of the old derogs.  If the derogs are not due to fall off soon due their own old age, you may get more FICO bang for the buck by attempting CR deletions than by using it only from the perspective of reduction of % util.

This may be particulary important if you have major derogs, such as an unpaid collection.

If this approach sounds interesting, I would first list the expiration of statute of limitations for the debt on each derogatory account, along with the statutory expected CR deletion date of each derog.  Come back on the site with that info, and advice can be given on how to address each.

Just something else to ponder...

[Anonymous]

Thanks to both of you for taking the time to respond Fortunately, I don't have any accounts in collection, charge-offs, suits or other public records to deal with. I do have late payments sprinkled throughout the history of all the cc's; I have considered also approaching each closed account with the proposition that if I pay the balance, would they remove 1, 2, or more of the late payments, particularly those that closed with a late payment status. Heading over to the acronym sticky to look up what a PFD is...... None of these ' minor' derogs are due to fall of on their own anytime soon

[GregB]

Let's back up for just a moment.

I understand that you want to buy a house through FHA and they require 640 FICO.

First, do you know your FICO scores? You only meantioned a credit score and that it is likely one of the many FAKO scores. I believe the EQ FICO here matches that pulled by most lenders. The TU FICO here is close but you might want more info on that. Then you can check the info on EX to make sure they don't have negatives that aren't on EQ and TU. It is a real possibility that your FICO scores are way lower than you think and you are basing buying a house on FAKOs that are much higher. Some of them like vantage have a max of 990 and can be WAY off.

Next, does that mean all three FICOs above 640? or your middle FICO to be above 640? If your lender can't tell you, there are knowledgeable people on the Mortgage Forum here.

I think the recent late is going to make this difficult, at best. You might want to run that past your mortgage person. It might be even more important to run that past the people on the Mortgage Forum here since you might get better info from several different people.

I think the mortage app and FICO will both "need" the closed accounts paid off. You will get best improvement on the rest by having less than half of the open accounts reporting a balance. Anything with a balance needs to be under 79% utilization. Next step is total utilization under 49%. I see you don't have enough money for the last.

 ETA: It might be critical to get the very recent late removed. Can you ask them very, very nicely and politely and offer to pay the amount way down? I seem to recall that most mortgages require NO lates for a certain period. Sounds like another question to post on Mortgage Board.

[Anonymous]

Thanks Greg. I pulled the EQ FICO here, and it was lower. (sadly,548} I enrolled in Score Watch also. The acct with the 2 recent lates is one of the closed accounts, so I am definitely going to be contacting them about removing the recent lates. The middle score needs to be 640 to cleanly meet the minimum. However my preferred lender is a credit union where I'm in year 5 of 6 of an auto loan with no late payments. The originator is willing to go to their second level underwriting committee if I can get the score "close". The originator - I didn't want a hard pull on my rpt so I gave her a copy of my May month end summary and a detail of what is on my Experian report. She is aware of the recent lates. The recent lates did not appear on the TU or EQ details I looked at. Off to examine the mortgage board... (trying not to be depressed, failing)

[GregB]

Both lates on one account makes it easier BUT if you went two months late on one account, that is harder to explain. I am a single parent to a child that has had a bunch of health issues and can understand how important things like payments get temporarily forgotten. If it is two payments in a row, that means it was forgotten for a long time.

EX updates several days faster than EQ and TU. There may be some delay for the creditor to report. The creditor may not report to all three. Is that account on the EQ FICO you pulled here? I hope you get lucky and that creditor only reports to EX.

Good sign that you are working with a CU and the originator is not concerned about the recent lates. It will be even better if the people on Mortgage Board don't have something negative to add.

I hope it works out.