@economan wrote:
Hi Gang,
I have a double whammy mortgage and credit card question. But don't worry, I'll focus on credit card util.
Currently, my overall cc ut is around 20%. My only cc is at 6000/12000. My problem is that I am 5 points shy of 700 on my mid score (EQX). If I can raise this score above 700 it will save me $2500 in loan fees. However, I am not sure if I should spend the $2500 on paying down the cc. If the score jumps to 700 or more, then I win in the sense that I spent the money paying off my own debt instead of loan fees. However, if the score doesn't jump to 700 or more, then I am out the $2500 I might need for closing costs.
I ran the FICO simulator and it says that if I pay down to 29% (in one month) my range will be 695-735 (argh). Does anyone have any experience with where the actual score ends up in the simulator's range??? Also, I ran the simulator for paying down to 39% and the result was 695-71.
All gueeses, thoughts, ideas are very appreciated.
I don't exactly agree with your thesis.
Whether your score jumps or not, you still paid down your debt, so you are not "out" that money.
However, if that $2500 is a make it or break it amount of liquid cash for closing, then IMO you are too tight to do a mortgage (again, just MO). A good rule of thumb is that after closing, have 1 to 2 months of mortgage payments in cash left over. A better rule of thumb is to have your emergency fund of 3 to 6 months saved prior to going into a mortgage (not including closing and down).
When you are sqeezing into a mortgage by the skin of your teeth, there is no room or margin for error, hiccup or change in circumstance (medical, job issue, unexpected expense, emergency, etc).
If you are bound and determined to close, and you can't if the score fails to jump, then you really can't pay the CC down. Cause the underwriter will object to you borrowing it back for down or closing. That's why I said it may be a bit premature to do the home...it's gonna cost you $2500 uneccessary closing fee, and maybe a blip on the rate which costs over the mortgage term.
