Overwhelmed and need advice!

[Anonymous]

Hey all,

Looking at getting a mortgage in 10 months so I'm starting the credit search now, starting with cleaning up my credit report. I have just paid off all my CC debt with a lump sum. This is now my account history.

Car financed through Toyota 550 at 60 month 0% interest 8 months old

Car refinanced through CU 700 at 48 months 4.7% interest 5 months old

CC open 11000 CL 0 bal 6 years old

CC open 7500 CL 0 bal 11 years old

Store CC open 750 CL 0 bal 2 years old

Store CC open 9000 CL 0 bal 5 years old

Co-owner of store CC 8000 CL 0 bal 2 years old

Bankruptcy 9 years ago.

Zero late 30, 60, 90's.

28 accounts on report

Due to recently paying off all my credit card debt just last month I had 34k on the above cards. Basically everyone was maxed out. My Fico from scorewatch was a 702 with only the 11k credit card reporting as paid off.

I'm just wondering do I close the 3 Store CC since they are paid in full, younger in age, and I don't want to use them? Or are they good to leave open on my credit report?

With my two new car loans are  the store CC's aging my debt? I'm can say with some hope that once all my cards report as zero balance I should see a 30 point increase on my score. So how would closing those account raise or lower it from there?

I'm not afraid of reading so if someone can't answer the questions but can send factual web links that would be appreciated as well. Thanks from the Newbie!

[Anonymous]

Hi werty!

Welcome and Great work!

If it were me, I would definitely leave your store cards open.  Store cards are great because they tend to stay open basically forever and can really help your AAofA as they continue to age.

Here's a helpful link on closing cards. 

Now that your balances are all down to zero, your challenge will be to keep them there.  As you've been reading, you've probably noticed that it's a good idea to report zero balance on all revolving accounts but one - and make sure that one reports less than a 9% balance.  This will be helpful to you when you fine tune your FICO at house hunting time.

And it looks like you've just cleaned up a bunch of monthly payments on those CC's.  You may want to consider rolling over the money that would have gone to those monthly CC payments to pay down one of your auto loans.  That will impact your DTI - which is not part of FICO scoring, but is definitely part of the picture during a mortgage app.

Glad to see you here!

[Anonymous]

Thanks for the quick reply!

I had already read that article from the site and basically got the same impression on closing CC. Maybe I'm unsure of this one, I was thinking that by closing those accounts my AAofA would be higher and thus helping me. Do closed accounts reflect in AAofA? I see that folks on here frequently say they wish the had good old debt but thinking about the mortgage has me wondering does a mortgage lender like the fact I have 36k in CC that can be maxed out in a short period?

On the continue to use one account (less than 9%) thing should it be the same CC always? I was reading that people used a old gas card just to keep it active and they were dinged for using old account. Forgot the exact term the poster said but that was the gist of it. Does the usage have to appear as a statement balance or can it be charge a dinner and pay off the next day?

Unfortunately, the large sum of money used to pay off the debt was due to a buy out from my wife's old job. And even more unfortunately, her new job only pays about 60% of what her old job did so not a whole lot of hope for my DTI ratio in the short term.

Thanks all and any advice is greatly appreciated!

[Anonymous]

Hi werty,

Yes - all accounts on your Credit Report count from the day they're opened and for as long as they are on your report, whether they are currently open or not.  So closed accounts still count and their age doesn't change when you close them.  They'll probably be on your report for about ten years after closing and will count in AAofA the entire time.

Your mortgage lender will be fine with your 36K in available credit - but they will be looking at your utilization (overall and individual) and how many accounts are reporting a balance.

You can rotate the cards that report a small balance - it does not have to be the same one.

If you have ScoreWatch, you will get a note if your CR reports a balance on a card that has not reported a balance for a long time - but if my recollection serves me right, you will not be FICO score dinged for this.  Someone will chime in and correct me if I'm wrong. 

The reported statement balance is what to keep on eye on when you're doing the "report a zero balance on all cards but one, and keep that one reporting less than 9%".   I actually keep my one reported balance much much lower than that.

Congrats again on paying down that debt!  And best wishes moving forward.  If your wife's salary is lower, you may really have to watch those CC balances and work hard to keep them at zero.  We've had to do some belt tightening at our house and it was relatively painless - surprisingly.  Who knew? 

[Anonymous]

Beam,

So if I understand this right if I close on account that is currently 2 years old, it will continue to be only two years old as long as it is on my CR? Otherwise if it ages from the date of opening regardless of being open or closed why does it hurt long term to close them? Long term I guess is 2-3 years? 

Yes I have to admit it feels good without all that CC debt! The more i read on here it just seems I will never be able to afford another house again. Had one but lost in BK/divorce in 2001. 

Mods, should i post the following in Mortgage section also?

I just read some very interesting posts on here but I feel that I'm almost never going to win. I found out that Child Support paid counts for DTI! Holy crap, I don't know if I have much of a chance now. I also read if 8 or 10 months only are remaining on installment loans they wouldn't be counted in DTI. Good news is I got my wife's info pulled with TU and EQ and I pulled my TU as well. Here's the info with all amplifying information. Can some one weigh in on the questions below?

Active duty E-6 so would apply for VA. Was on VA loan when I filled BK in addition I had a 125% mortgage with another lender in 2001. I haven't read anything to lead me to believe that this matters for eligibility now.

My TU is 712 my EQ 702. My wife's TU 708 and EQ 704. So I figure this puts us in pretty good place.

I have the BK from 2001 and no other baddies. My wife has 3 paid collections from 2005 and that is it for her.

All of her debt (which is 0$) is revolving now. I mistakenly thought that her credit was worse than mine so I'm the only one on both car notes. Do I ask NFCU to add her to a car loan?

Considering all of my pay and military entitlements and her pay from government service (less than 1 year on job) when we move to Jacksonville FL in NOV 2011 we will make basically 7750 gross a month.

I keep seeing different DTI ratios and DTI questions on the site so the answer just gets more confusing.

Should I wait till my BK falls off my CR in JAN 2012 to even attempt to buy?

With 7750 income

Scores listed above

7K in savings by NOV 2011

Child support paid by me 1100 a month

Child support received by her 200 a month (But is anything but regular)

My car 550

Her car 696 (we owe 26K still but could maybe get it down to 6500 or so it wouldn't count towards DTI?)

How does all this look for me?

I have been looking at houses in FL and it seems I could be happy with a house in 225k-240k range. This forum is a great tool and I really appreciate the responses!!!!!