New to the FICO Forums

[Anonymous]

Hi All,

First timer here.... After reading several messages today, thought I would put some info out there.  I am looking for advice on how to raise FICO score.

I feel like I have way too many CCs... I'll say perhaps 10 (varying from Chase, Discover, AMEX, Citi, MBNA/BofA, Wachovia, a couple of dept store cards). 

Before I was married, never had any CC debt, and less credit cards.  A few months before wedding (2006), I found out my wife had over $10k in School Loans, and over $15k in CC debt ($9k on one, and $6k on another).  She was making only the min. payments, but every month half of what she was paying was the interest & finance charge portion, and the other half was her purchases. 

I had purchased a home few years before we marriedk, that now has about 40k-50k equity.  We have made good strides in getting some of the balances paid off on the CCs and school loan (at about $1,000 total payments per month), while also saving some money ($300/month) in a high-yield savings account (almost 5% APR rate).  However, we needed to get a new roof on the house to keep from having home interior problems, so we put $7k on a CC for the roof.  We checked our scores in June 2007, and she was in the EQ 790's, and I was EQ 750's.  What I realized was we balance x-ferred some of her credit card debt to a 0% APR offer that I received in my name (perhaps affecting my score).  Since then, we have x-ferred CC balances 2-3 times, to prolong the 0% APR.  I make a little less money now than i did when I was doing IT work (burnout!), but her salary has improved well the last 2 years.  Our overall income has been roughly the same the last 2-3 years.

The house is on a ARM mortgage (in my name), that will adjust starting in Nov 2008 (currently 5%).  I am trying to increase my score into the high 700s, in case we re-fi or move and have to take out a new mortgage.  I was thinking about closing some of my older credit cards no longer being used.  But, i have heard that can have a negative impact.  Ultimately, we have the cash in our savings account to close out all the CC and School Loan balances, but it would leave us with only about 1-2 months of income left in our "safety money" savings.  All of our cars are old and paid off, but we are starting to see more repair bills (shocks, struts, differentials, CV boots, A/C, Starter, etc.). 

I am expecting we will have a nice tax return over $5k coming by May 2008 or so.  My job incurrs a lot of expenses (about 30,000 miles/yr in sales job).  No corporate car allowance, or mileage reimbursements.  The gas is completely on me, so I write off the mileage.

We still have about $19k in debt to go ($10 in CC, $9k school).  I am imagining a newer car may be on the horizon.  One car has over 200k miles, the other close to 150k miles. 

Does anyone have suggestions on what's the best plan to follow to raise FICO score?

1)  Immediately payoff debt, free up about $1,000/month from CCs.

2)  Keep going, like we are, paying about $1,000 month for next 1.5 years

3)  .... Other suggestions?

Your responses are much appreciated.

[Red1Blue]

Hi T-Rex, welcome to the forum.

[marty56]

I would pay the CC down as soon as possible.  This will raise your scores which will help with a new car and help you to get a fixed rate mortgage which would be your second goal.

Any scores over 760 is good as gold so you should be fine.

[haulingthescoreup]

Don't worry about paying off the student loans early. You don't get the same amount of score movement from installment credit as you do from revolving credit. Use your cash for the CC's. Having an installment loan with timely payments is useful for credit mix and history.

The handy thing about those older unused cards is that they keep reporting $0, which balances out the cards that do report balances, and that's helping you. In most cases, you do NOT want all your cards reporting balances. The general goal is to have balances on half or fewer of the total number of open accounts, which includes loans and mortgages as well as CC's. You might take these cards out, blow the dust off, charge $5 or $10, and pay them off the moment they show up online. You don't want the CCC's to close them on you.

For the cards that do have balances, get each one's balance down under 50% of its credit limit initially, and then keep bringing them down, ideally getting them under 10% each. Note: you don't want all your cards reporting under 10% --try to have most at $0. Again, that's why you don't want to close your unused ones.

The overall picture that you are trying to paint for future creditors is that you have already been trusted with credit (lots of cards in good standing), you're not too chicken to use your credit (the cards showing balances), and when you do use your credit, you don't use much and can pay it off easily (balances under 10%.)