topic Re: Looking for the best way to pay this for maximum impact in Mortgage Loans

Looking for the best way to pay this for maximum impact

Anonymous — Sun, 13 Aug 2017 16:53:04 GMT

Hello all, the wife and I are getting ready to buy our first house, will be a new construction, price somewhere between 430-450k. I will be the only one on the mortgage but the wife will be on the title.

Salary: 102k per year

Annual Bonus: 1-20% but figure 10%

Stock Awards: 4500-10k (100% vest in 5 years, 20% vest in 1 year)

Daughter pays $400 a month for her car and some of her insurance premium

Debts:

Discover CC: $800 balance (not my card, but i'm a user so it affects me) - $1400 limit

Capital 1: $400 balance - $1200 limit

Am Ex Blue Every Day Card: 0$ balance - $1200 limit - Just got.

Car 1: $638 month - 25k balance (I pay 640)

Car 2: $328 month - 17k balance (I pay 350)

Ashley Furniture: $3200 balance - $4k limit - Deferred Interest will be tacked on in October.

Care Credit: $3955 balance - $4,500 limit

We'd like to start the contract at the end of October and delay the build until it can complete in October and I get another bonus.

The wife is getting part of an inheritance of roughly $11,000 by September 15th and another small portion of 2-4k in December. I'll be getting my annual bonus of $10k (minus taxes so figure $7500) on September 15th. My Fico 4,5,2 scores are between 634 and 672 as of 8/7/17. There are some late payments from 3+ years ago, 1 collection that I'm disputing (may offer to pay and have them remove the tradeline but its $385 to Progressive Ins.) Other than that, nothing but on time payments for the last 2.5 years. I'm thinking my hits are coming from my utilization, but i've been told on the home page of myFico that if I just pay $367 ish a month towards it I will get a bigger bump than paying it off completely. I'd like to look at getting the biggest bang for the buck and pay down this debt. My thoughts were to pay off the Ashley and Care Credit with my bonus, using the wife's inheritance to pay towards the daughter's car. With her paying me $400 and my $350 that should pay it off in 5-6 months. I could then use all that extra cash flow to pay off the other CC's and I should be sitting with much higher scores when it comes time to close...roughly 700 ish i'd imagine.

Am I wrong in this assumption?

Re: Looking for the best way to pay this for maximum impact

Anonymous — Sun, 13 Aug 2017 17:51:31 GMT

The most crucial first step is to make sure you have all three reports recently pulled.

I would be very cautious about paying down installment debt. There is indeed some benefit you can get from that but it is best done very carefully via a plan that makes sure that all installment loans remain open (i.e. have a positive balance). Also since your goal is real estate, it is likely that the mortgage scores will get no benefit of any kind from paying down (or paying off) installment debt -- it's FICO 8 where you can realize some benefit in this area.

Where you should focus is paying all revolving accounts to zero except one. The remaining credit card should report a small balance each month, like $20 or so. You can and should do this immediately and it is crucial to leave exactly one card reporting a small positive balance.

Is the Ashley Furniture account an installment account or a revolving account? Your reports should tell you.

While you are doing that I'd hang out with the people on the rebuilding forum and see if they can give you advice on how to get as many of your derogs completely removed as possible. Getting all collections removed would be a good start. BTW, are you disputing the collection that you mentioned because the debt never actually occured?

Re: Looking for the best way to pay this for maximum impact

Anonymous — Sun, 13 Aug 2017 19:17:41 GMT

I'm disputing the debt because I cancelled the insurance prior to my last month with them ($385) and they still billed me for it. As for ashley, its revolving. Thanks, i'll post this on the FICO score builders to see what they have to say about it. More than anything i'm looking to free up some cash flow so my ratio's don't get out of whack.