help with paying down credit cards-

Anonymous · ‎11-07-2016

I am trying to find the best course of action to pay down my credit cards in an effort to boost my mortgage scores the fastest.

I have six credit cards with relatively low limits. They are all mostly maxed out d/t wedding expenses. I have roughly $1,000 per month extra to pay them down over the next 4 months. also if anyone can give me a rough estimate on how many points I'd gain when the cards are paid off that would be helpful..thanks in advance

Capital One limit Mastercard opened june 2015 $2000 balance $1993

Capital One Limit Mastercard opened Aug 2016 $500 bal $476

Merrick Visa opened nov 2015 limit $1200 bal $1173

First premier Mastercard opened May 2016 limit $700 bal $673

First Premier Mastercard opened oct 2014 limit $550 bal $520

Milestone Mastercard opened aug 2016 limit $300 bal $243

my scores are as follows:

Equifax 582 mortgage 586

Transunion 586 mortgage 603

Experian 626 mortgage 587

Anonymous · ‎11-07-2016

Hi. Well, that is awesome that you will be able to pay off 80% of your debt!

It would be helpful if you specified what credit card products/types they are and when they were opened. That would give a better idea of how to strategize.

Anonymous · ‎11-07-2016

thank you..ive highlighted the new info. i hope this is what you meant by credit card type/product?

newhis · ‎11-07-2016

@Anonymous wrote:
I am trying to find the best course of action to pay down my credit cards in an effort to boost my mortgage scores the fastest.
I have six credit cards with relatively low limits. They are all mostly maxed out d/t wedding expenses. I have roughly $1,000 per month extra to pay them down over the next 4 months. also if anyone can give me a rough estimate on how many points I'd gain when the cards are paid off that would be helpful..thanks in advance

Capital One limit Mastercard opened june 2015 $2000 balance $1993 pay $320
Capital One Limit Mastercard opened Aug 2016 $500 bal $476 pay $70
Merrick Visa opened nov 2015 limit $1200 bal $1173 pay $190
First premier Mastercard opened May 2016 limit $700 bal $673 pay $100
First Premier Mastercard opened oct 2014 limit $550 bal $520 pay $77
Milestone Mastercard opened aug 2016 limit $300 bal $243 pay $243

I dont know much, but I would pay this way first month. Just to bring 1 card to $0 and the other to less than 85%.

You also said that the $1,000 is extra, so I guess you have something to pay them, maybe the min. So I used the $1,000, but you should/could pay more than that.

Because you only have 1 account less than 90% and the others more than 94%, I think you should get a good jump with this first payment, but I can't guess how much.

Anonymous · ‎11-07-2016

Hello Ashley! It looks like you have a total current debt of $5078 and a total credit limit of $5250. Is that right?

The best solution, given the amounts you describe on each card, is one that ends with the four small-debt cards paid off entirely ($0 balances) and the other two cards paid down as much as you can (but make sure that each card is under < 29% of its credit limit).

It doesn't matter exactly what order you do it in (what matters is the end result) but a simple approach would be to pick one smaller-debt card to pay off entirely each month. And with the leftover money pay all the other cards down equally.

At the end of four months you will have four $0 balances, two cards under < 29%, and a total utilization of < 19%. You will get a gigantic boost if you do that.

That focuses on your problem as given -- which is to think of it purely as a mental exercise in paying down debt and increasing your scores. But... you are in fact doing that with a specific end in mind... namely buying a house very soon.

So bear in mind that there are other considerations. For example, many realtors will want you to get a pre-approval letter from a bank before they will even begin help you look at properties. If you try to get that pre-approval in a month or two from now, your scores may be sufficiently low that the letter can't be given or that the letter covers only a small dollar value (limiting your choice of properties).

Essentially you have got time constraints is what I am saying, owing to wishing to buy a house four months from when all your cards are maxxed out. (At least I think that is your situation.) You need to time to pay them down, time for the new balances to report, time to get a pre-app letter, time to look around for properties, time to negotiate a price and go under contract, and then time for the final underwriting. Ideally you'd want to pay down all your debt before you do the other things.

Hope this helps.

PS. Thoughtful advice from Newhis!

Anonymous · ‎11-07-2016

@Anonymous wrote:
Hello Ashley! It looks like you have a total current debt of $5078 and a total credit limit of $5250. Is that right?

The best solution, given the amounts you describe on each card, is one that ends with the four small-debt cards paid off entirely ($0 balances) and the other two cards paid down as much as you can (but make sure that each card is under < 29% of its credit limit).

It doesn't matter exactly what order you do it in (what matters is the end result) but a simple approach would be to pick one smaller-debt card to pay off entirely each month. And with the leftover money pay all the other cards down equally.

At the end of four months you will have four $0 balances, two cards under < 29%, and a total utilization of < 19%. You will get a gigantic boost if you do that.

That focuses on your problem as given -- which is to think of it purely as a mental exercise in paying down debt and increasing your scores. But... you are in fact doing that with a specific end in mind... namely buying a house very soon.

So bear in mind that there are other considerations. For example, many realtors will want you to get a pre-approval letter from a bank before they will even begin help you look at properties. If you try to get that pre-approval in a month or two from now, your scores may be sufficiently low that the letter can't be given or that the letter covers only a small dollar value (limiting your choice of properties).

Essentially you have got time constraints is what I am saying, owing to wishing to buy a house four months from when all your cards are maxxed out. (At least I think that is your situation.) You need to time to pay them down, time for the new balances to report, time to get a pre-app letter, time to look around for properties, time to negotiate a price and go under contract, and then time for the final underwriting. Ideally you'd want to pay down all your debt before you do the other things.

Hope this helps.

PS. Thoughtful advice from Newhis!

thank you!!

you are correct in the count of my debt. From reading the forums I thought that would be the best course of action with paying them down. I plan to pay off most of the debt and leave the larger card from Capital one showing a small balance when I apply. I will have my debt paid down by mid February, all of my cards will have been reported by then so I will have to wait till mid/late March to apply if my scores are appropriate at that time.. and I pray they are good enough for a FHA loan.

thank you again.

Anonymous · ‎11-07-2016

Awesome news. My advice was based on the idea that you might only have four months (at 1k per month) for the paydown. If you think you can get the debt 99% paid off that is the best news yet. Do it and you will get a huge score benefit.

And yes, all cards at $0 except one with a small balance is the best approach. Just make sure that the one card:

(1) Is a true credit card (not a charge card)

(2) Is in your name (not an AU card)

(3) Has a balance of at least $5. (Ultratiny balances like $1-2 can sometimes be treated as $0)

BTW, how do you plan to monitor your scores? I can suggest a very low cost solution if that will help.

Anonymous · ‎11-07-2016

Anonymous · ‎11-07-2016

@Anonymous wrote:
Awesome news. My advice was based on the idea that you might only have four months (at 1k per month) for the paydown. If you think you can get the debt 99% paid off that is the best news yet. Do it and you will get a huge score benefit.

And yes, all cards at $0 except one with a small balance is the best approach. Just make sure that the one card:
     (1) Is a true credit card (not a charge card)
     (2) Is in your name (not an AU card)
     (3) Has a balance of at least $5. (Ultratiny balances like $1-2 can sometimes be treated as $0)

BTW, how do you plan to monitor your scores? I can suggest a very low cost solution if that will help.

I have calculated a payment plan through Februaury 15th and if I wait until then i should be able to pay them all off. I will leave 20 dollars or so on the Captial One card. It's an actual credit card, Im not an AU either. Kinda Frustrating that I'm paying them down a few days after they report.. I don't get paid until the 15 and the last card reports on the 12th or so which is why I will have to wait until March before I can see if my scores have improved enough to apply for a FHA loan.

I monitor my scores through this site and I have an account w. experian which shows my score at 626 and here its 621 and hasnt been updated yet...kinda odd

Anonymous · ‎11-07-2016

@Anonymous wrote:
@Anonymous wrote:
Hello Ashley! It looks like you have a total current debt of $5078 and a total credit limit of $5250. Is that right?

The best solution, given the amounts you describe on each card, is one that ends with the four small-debt cards paid off entirely ($0 balances) and the other two cards paid down as much as you can (but make sure that each card is under < 29% of its credit limit).

It doesn't matter exactly what order you do it in (what matters is the end result) but a simple approach would be to pick one smaller-debt card to pay off entirely each month. And with the leftover money pay all the other cards down equally.

At the end of four months you will have four $0 balances, two cards under < 29%, and a total utilization of < 19%. You will get a gigantic boost if you do that.

That focuses on your problem as given -- which is to think of it purely as a mental exercise in paying down debt and increasing your scores. But... you are in fact doing that with a specific end in mind... namely buying a house very soon.

So bear in mind that there are other considerations. For example, many realtors will want you to get a pre-approval letter from a bank before they will even begin help you look at properties. If you try to get that pre-approval in a month or two from now, your scores may be sufficiently low that the letter can't be given or that the letter covers only a small dollar value (limiting your choice of properties).

Essentially you have got time constraints is what I am saying, owing to wishing to buy a house four months from when all your cards are maxxed out. (At least I think that is your situation.) You need to time to pay them down, time for the new balances to report, time to get a pre-app letter, time to look around for properties, time to negotiate a price and go under contract, and then time for the final underwriting. Ideally you'd want to pay down all your debt before you do the other things.

Hope this helps.

PS. Thoughtful advice from Newhis!

thank you!!
you are correct in the count of my debt. From reading the forums I thought that would be the best course of action with paying them down. I plan to pay off most of the debt and leave the larger card from Capital one showing a small balance when I apply. I will have my debt paid down by mid February, all of my cards will have been reported by then so I will have to wait till mid/late March to apply if my scores are appropriate at that time.. and I pray they are good enough for a FHA loan.
thank you again.

I'd also like to add that unless you have done so recently, you should ask for a CLI. You may only be able to do so with Capital One but that is the most important. You might want to wait a couple months before trying so that your balance is lower when you do. If you try online and get declined, always call for reconsideration, that works for a lot of people. I know you are only allowed an increase every 6 mo., I presume that's per card, but you may want to look into it. You definitely want to do it with the larger limit card. A credit increase will lower your utilization rate, as well as increase your available credit.

Also, you may want to consider combining your Capital One cards. You won't be eligible until the newest card is 6 mo. old, but that is in a few months. Even if you get declined for an increase, combining the 500 card into your 2000 card will give you a 2500 limit and still lower your utilization percentage. Even if you do get an increase on both cards, you may still want to consider it. It will show a card with a nice limit. It should also increase your AAoA a touch since the 500 limit card is one of your newest cards. Below is a good article that explains the pro's and con's of combining cards. You should take a look at it. Good Luck!!