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First post here and wondering if I'm doing the right thing...

SouthJamaica
Super Contributor

Re: First post here and wondering if I'm doing the right thing...


@joesef wrote:

1) Thank you!

2) Thank you again. I wil learn lots on here from people like yourself. Smiley Happy

3) My plan is to pay the car off about 8 months early because I still need to buy some things for my house when I buy. I don't have alot and didn't take alot from my divorce. And I figured since that expensive car payment is out of the way I can free up money to buy what I still need, Should I take it down as low as I can go but not close it as I'm going through the process of buying a home? Leave a 1000 on it or something?

4) I plan on putting like 20.00 on each card and paying off when the bill comes just to show that I can borrow money and pay off on time with low utilization. I figured that would help me. I don't plan on running any card up, this is strictly a credit building process to hopefully get me to my 700 score that I want.


Auto loan

Generally speaking it's a good idea to avoid radical changes in the months prior to a mortgage application. However I am told that the mortgage scoring models are not as concerned as FICO 8 with whether you have an open installment loan or not; i.e. I am told that your installment loan utilization percentage is not as significant. So while I can say with certainty that paying off your auto loan to zero will decrease your FICO 8 score, I really do not know if it will harm, help, or have no effect on, your mortgage scores.

 

Credit cards

Very bad idea to let small balances report on credit cards and then pay them off. All of your FICO scores, especially your mortgage scores, take off points for having a large number of cards reporting balances. You should have all cards but one reporting a ZERO balance.

 

Negatives

As RobertEG points out it would be great to get rid of one or more of the negatives. You can send verification letters to the bureaus, which sometimes results in negatives getting deleted.


Total revolving limits 663000 (585000 reporting) FICO 8: EQ 716 TU 747 EX 713

Message 11 of 13
joesef
Regular Contributor

Re: First post here and wondering if I'm doing the right thing...

I'm still a little thrown off between what carrying a balance exactly means. So if I have 30.00 on one credit card and the minimum payment is 25.00 I should pay the 25 and let the remaining 5.00 sit there? Or does it mean once I get my statement which reports during that time I should pay the whole 25.00 off? Then wash, rinse and repeat.

Message 12 of 13
CreditGuyInDixie
Super Contributor

Re: First post here and wondering if I'm doing the right thing...


@joesef wrote:

I'm still a little thrown off between what carrying a balance exactly means. So if I have 30.00 on one credit card and the minimum payment is 25.00 I should pay the 25 and let the remaining 5.00 sit there? Or does it mean once I get my statement which reports during that time I should pay the whole 25.00 off? Then wash, rinse and repeat.


Here are some definitions and some conceptual tools.  I just posted this for someone else a couple hours ago.  Once we get the words and concepts clear, I'll answer your question.

 

First, let's get clear what it means for a card to report a balance.  That just means that the statement prints and it has a positive balance on it.  That's the amount that you owe.  That amount gets reported to the three credit bureaus, typically  the day after the statement prints. (If the statement shows $0 that also gets reported.)

 

To PIF or pay in full means to pay that amount in full, sometime in the 25 days after the statement prints.  (25 is a rough figure -- each issuer will give you its timeframe.)  PIF is short for Pay In Full, which in turn is short for "Pay (the balance that appears at the top of your monthly statement) In Full."

 

To carry a balance, by contrast, means to pay some of the amount owed on the statement, but not the full amount.  Thus if the amount owed is $400, and you pay $100, then $300 is carried over to the next statement.  You then pay interest on that $300.

 

You will find occasionally that newcomers to this site will often say carry when they mean report.  They might say, for example, that they always carry a balance, but they really just mean that their card is always reporting a balance that they pay off in the three weeks following the statement.

 

So now that you have those terms and ideas clear, the best thing for you to do is to always PIF and never to carry a balance.  Some people go further, which is to PTZ or Pay To Zero.  That means they pay the card down to zero before the statement prints, which causes it to report $0 to the credit bureaus.  That's a perfectly fine strategy, as long as you have one card reporting a positive balance.  (FICO will give you a score penalty if all of your cards report $0.)  PTZ requires more work, however, since you can't just set up autopay, use your cards, and forget about it. 

Message 13 of 13
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