Score vs Debt Ratio

[Anonymous]

Hello everyone, new to this forum!  Been reading many threads and have come to a dead end with my dilema. 

If this is in the wrong thread please feel free to move it. 

We are currently building a home.  It will be finished soon and closing is November 15th.  (This is a ...its not yours until after its built contruction) 

We are close to approval but "not there yet" as my loan officer likes to say without much detail or plan as to how to get there since I've been hearing this since January. 

So here we are a month and half from closing.  Here is some info:

This will be a first time VA home loan. 

 Most recent mid scores are 612 and 608 

Debt to income ratio is around 48% with our new mortgage. 

My question is....Is it easier to bring down the debt to income ration to the 41% that they are asking for  or bring our scores up to 620+ in the next month. 

We can probably pay down approx $3000 immediatly 

Her "credit wizard"  had us having to pay almost $10,000 to bring the scores up to 620. 

More info.....Total monthly income is 11,942 

Debt (with mortgage)  is approx 6,172

Also we recieve 1798 per month for our daughter who is in college  ( which I know they proabably cannot use) 

Along with this we are saving for our 15,000 closing costs.  (we are very close) 

Any insight would be appreciated!!  

[Thomas_Thumb]

The Fico mortgage scores are quite sensitive to # cards reporting balances. I have no idea how many credit cards you have and how many of them show positive balances on monthly statements.

Let's say you have 9 credit cards and 5 post balances on statements and of those 5 you are carrying over a balance month to month on 2 cards (not paying statement in full). The 1st thing to do is stop using the 3 cards which you PIF... or continue to use them but pay all charges before statements post so the statement shows a zero balance. If you do this then essentially you went from 5 of 9 cards showing balances to 2 of 9 cards showing balances.

Reducing # cards reporting balances from 5 to 2 could increase your mortgage scores 10 to 15 points even if aggregate utilization is held constant.More likely your Ag UT% will also be lower and this could potentially benefit score as well. Where are you and your spouse on aggregate CC utilization currently and how many cards are you reporting balances on.in a typical month?

[Anonymous]

Yes we have alot of credit cards that are mostly maxed out which I know is what is hurting our score since we have no late payments. 

Just not sure how many we are going to need to pay off  or  down?  And how quickly it will all effect the score.  

As with the ratio score I know that its going down. 

[Thomas_Thumb]

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@Anonymous wrote:

Yes we have alot of credit cards that are mostly maxed out which I know is what is hurting our score since we have no late payments. 

Just not sure how many we are going to need to pay off  or  down?  And how quickly it will all effect the score.  

As with the ratio score I know that its going down. 

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Max out is 90%. So get all cards below that level. Then, if you have any small limit cards pay them off so you don't have 100% of cards reporting balances every month. Once you have done the above drive down aggregate utilization with focus toward reducing balances on your highest APR cards.. Some key milestones for Ag UT% are 70% and 50%. 

[StartingOver10]

Can you post the cards (as card 1, card 2 etc), credit limits, and balances?  It would help for others to give you more specific advice. but TT is exactly right - overall balances + individual credit card balances and # of cards reporting a balance all make a difference in your score. 

[thom02099]

Most recent mid scores are 612 and 608 

Something that I found while researching a refi, when two people are on the loan application, the LOWER of the two mid scores are what is the basis for underwriting.  While not a significant difference between the 612 and 608 you noted, it's something to be aware of.  If there are different factors affecting that 608 score, perhaps you want to work on those first, to get that one up, and when/if it exceeds the 612, do the same thing with the 612 score.  Or perhaps do it simultaneously if possible.  That 4 point difference could be significant when trying to reach 620+.  Your starting point will be the 608  and not the 612.  

Her "credit wizard"  had us having to pay almost $10,000 to bring the scores up to 620. 

If you have the funds to do so, then why not do so?  If you're paying off $10K in debt, you scores could result in being higher that 620.  If you don't have the funds to immediately (you said you have $3K available immediately)  do so, then use the snowball affect...pay off the smallest balance, then move on to the next smallest, etc, until they are paid down.  Or, some may suggest, pay down the ones with the highest APR, then the next highest, etc.   Personally I would go with lowest balances, but that's just me.