To Be or Not To Be, Authorized User or not.

[Anonymous]

My wife and I are preparing to refinance our house to consolidate a 1st and 2nd mortgage that was created during the initial purchase two years ago.  Her credit score is 720+ and mine is approximately 688.    Her utilization is at 28% on her two cards with a total credit limit of $43,000.  Both of her cards have a history of more that 15 years. My utilization is at 58% on 6 cards with a credit limit of $23,700. Neither one of us have a negative comment on our credit reports.  

I'm 47 and only started a credit history six years ago when we met.  Until then, I had no reason for credit.  Everything was purchased in cash.  Unfortunately, I fell into the cc racket quickly, and found myself in debt.

My question is with regards to Authorized User accounts.  I have two choices in how to improve my credit score before we refinance:

1)  To pay an additional $4,500 on my cards to bring myself to a 50% utilization.  This will take about 6 more months since I don't have that amount available for cc payments; or,

2)  Have me placed on one of her cards as an Authorized User.  This would create a scenario where I would now have a 44% utilization, with a $49,000 credit limit and a balance of $21,000.  That would also give me a 15+ year history.

We aren't in a hurry to refinance.  We have 3 years left before our fixed rate loan turns into an adjustable rate, and we aren't struggling financially, so we don't feel any pressure.  The  only thing that might have an effect is that we are planning on closing the doors on our business in September due to a highway construction project in front of our building that is scheduled for three years. I've had the business for 11 years, and she joined me 7 years ago.  The business will continue, however, since the major part of sales occurs when I travel.  It's just that my wife does plan to get a job, which will change her employment history even though she will continue managing the books.

In summation, what sort of input can you offer about which path to follow?  I have heard that too much available credit can also negatively affect consideration for mortgage loans.

Any input would be greatly appreciated.

[Anonymous]

Becoming an AU on your wife's account would definitely help boost your score immediately. Then, pay down your highest interest CC account first, so you get the greatest benefit from your payments. If you get to a point where your two highest interest accounts have the same rate, pay down the account with the higher utilization percentage first. At the moment, I wouldn't worry about having too much available credit. If your lender indicates that is a concern at the time you refinance, you can deal with it then.

[Tuscani]

Even at 50% util you are still taking a score hit.. try and get it under 30% with 10% and under being ideal.

[Anonymous]

2)  Have me placed on one of her cards as an Authorized User.  This would create a scenario where I would now have a 44% utilization, with a $49,000 credit limit and a balance of $21,000.  That would also give me a 15+ year history.

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I guess the real question is with regards to option #2.  Would this have any negative impact on my credit score?  Obviously, reducing my utilization to 30% is the best move, but that will take some time, and the interest rate for refinancing is in our favor right now, so we are considering doing the refi by September.

[Tuscani]

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B4mylife wrote:

2)  Have me placed on one of her cards as an Authorized User.  This would create a scenario where I would now have a 44% utilization, with a $49,000 credit limit and a balance of $21,000.  That would also give me a 15+ year history.

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I guess the real question is with regards to option #2.  Would this have any negative impact on my credit score?  Obviously, reducing my utilization to 30% is the best move, but that will take some time, and the interest rate for refinancing is in our favor right now, so we are considering doing the refi by September.

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Are there any late payments on her account?

[MidnightVoice]

Is it worth enquiring of your mortgage comany what CR gives what rate?  I know that for my possible new purchase my wife and I are high enough in score to get their top rate (they take the middle of the 3 FICOs)

[Anonymous]

Tuscani,

Neither one of us have ever had a late payment on our accounts

[Tuscani]

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B4mylife wrote:

Tuscani,

Neither one of us have ever had a late payment on our accounts

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I would do it since there is really good history there and 0 lates... Just try and get her util down as well.

[Anonymous]

Thanks guys. 

That gives us a good idea for our plan of attack.  First off, using the FICO simulator, we realize that I could hit 700 by paying down the cards by $1,300.  At that time we will talk with our current lender, with a printout of my credit report, to see if we can get a better rate.    If all else fails, we will then enact the Authorized User approach. 

[Tuscani]

Just remember the simulator is to be used as a guide only.