Balance ratio between Credit Cards before applying for Mortgage

[chris288]

I have been doing home improvements for the past few months on my home.  Since I am going to be refinancing to get a lower interest rate I wanted to build some equity in my home by adding an addition on myself.

I have put all the home improvements on my credit cards ( which all had zero balances before) roughly about 27k.  I have split this between all 5 credit cards I have.  3 of them have lower limits which are showing them above 85% debt to income ratio.  The others are a higher limit, but below 30% debt to income ratio.  My total avalible credit is 52,700k, to which 27k is being used.

1 CC has a 25k limit which I have 20,000 on just that card.  The other card has a 20k limit which has 6k on it.  The other cards have limits of 3700, 2500 and 1000.  Those are maxed out. 

My question is what "looks" better or will raise my score higher is to transfer all the balances on the other cards to the one big one with 25k limit and have it maxed out?  Then have zero balances on 4 of the 6 cards?  The one card with 25k limit would be maxed and the other card with the 20k limit would be at 50%

Is this a better idea?  I also will be taking some of the equity and paying all the cards to a zero balance when refi'ing. 

Any mortgage agents here with advice?  Anyone?

Thanks for the help and advice on how to maximize.

[llecs]

For max points, get all CCs to report $0 with the exception of one and get the one to report a balance of under 9% of the CL.

Your balances may or may not be an issue for approval. It depends on your scores now and DTI (which is unrelated to scoring).

High util is a score dinger. You're at 51% if I read right. If util is a top negative scoring reason, you could easily see 50-70 points if you pay off the cards as suggested above. If that's not possible, then pay off the lowest balances first for more points, and pay down any maxed out CCs (extra FICO ding for being maxed out).

You also threw around DTI. DTI doesn't have anything to do with credit utilization. Your CCs report the minimum monthly payment each update. DTI factors in those minimum payments and any other fixed obligations, like loans, and divides those minimums into your monthly income to calculate DTI. Lenders have their own requirements and YMMV. So, the more $0 balances you have, the lower the DTI.

[Quips]

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@chris288 wrote:

I have been doing home improvements for the past few months on my home.  Since I am going to be refinancing to get a lower interest rate I wanted to build some equity in my home by adding an addition on myself.

I have put all the home improvements on my credit cards ( which all had zero balances before) roughly about 27k.  I have split this between all 5 credit cards I have.  3 of them have lower limits which are showing them above 85% debt to income ratio.  The others are a higher limit, but below 30% debt to income ratio.  My total avalible credit is 52,700k, to which 27k is being used.

1 CC has a 25k limit which I have 20,000 on just that card.  The other card has a 20k limit which has 6k on it.  The other cards have limits of 3700, 2500 and 1000.  Those are maxed out. 

My question is what "looks" better or will raise my score higher is to transfer all the balances on the other cards to the one big one with 25k limit and have it maxed out?  Then have zero balances on 4 of the 6 cards?  The one card with 25k limit would be maxed and the other card with the 20k limit would be at 50%

Is this a better idea?  I also will be taking some of the equity and paying all the cards to a zero balance when refi'ing. 

Any mortgage agents here with advice?  Anyone?

Thanks for the help and advice on how to maximize.

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My advice to maximize score (if you are not paying them way down or off prior to refi) would be to carry balances on only the 2 high CL cards. That way you would not show a balance on more than 50% of your cards. As for the 2 large CL cards - i would split the $27K owed between them and have one be at under 50% util and the other under 80% so as neither would be "maxed out" which would cause a FICO ding. It would also help if you could get your total Utilization under 50% as well.

Good luck

[chris288]

Great advice!  That was my question on what looks better.  I had my fico for equifax showing a 784, then where I have used my cards its 695. EQ.  I have no negatives on my credit reports, so only bad thing is the util only.

So its better to just pay off the lower cards before applying.  Thanks.  Also what is considered "Maxed out" by the scoring model?  I do not want to get the extra maxed out fico ding.  Anything over 95%?  Would that considered maxed out? I could shift some off the big 25K limit over to the other one so it would be closer to 50 or 60% util.

Thanks for the help.  I would like to have over a 700 tri-merge when the Mortgage lender pulls my report to get the lowest fixed APR on my refi.

[chris288]

I think you answered my reply question Quips.  So under 80% is considered NOT maxed out?  That is what I was thinking as well.

Thanks

[Quips]

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@chris288 wrote:

Great advice!  That was my question on what looks better.  I had my fico for equifax showing a 784, then where I have used my cards its 695. EQ.  I have no negatives on my credit reports, so only bad thing is the util only.

So its better to just pay off the lower cards before applying.  Thanks.  Also what is considered "Maxed out" by the scoring model?  I do not want to get the extra maxed out fico ding.  Anything over 95%?  Would that considered maxed out? I could shift some off the big 25K limit over to the other one so it would be closer to 50 or 60% util.

Thanks for the help.  I would like to have over a 700 tri-merge when the Mortgage lender pulls my report to get the lowest fixed APR on my refi.

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Not sure what FICO counts as "maxed out" - have seen/heard anywhere from 80% - 95% Util. That was why I suggested staying under 80% on the high limit cards. If I read your numbers right, you have $27K of debt - if you put $18K on the $25K CL card and the other $9K on the $20K limit card you will be at 72% and 45% Utilization on those 2 cards. Again - if you want even more score improvement, get the total debt down to $26K which gets you under 50% utilization in total.

[chris288]

Thank you for all your help.  Great advice!  Now anyone know a good mortgage broker for refi's?  LOL