Hello Everyone,
I wanted to get some advice on a plan to improve my credit score, which I named my nuclear plan. I want to purchase a home in the near future, but currently, my credit score is in the low 600’s. I have a total revolving debt of $16,997, in which $13,130 is on open accounts and $3,847 is on a loan with a fixed payment. I can currently take out a loan from my 401k and eliminate all the debt, with the exception of the loan amount. I would like to keep that paying them so that I can maintain some active payment history. Now, I know that I will lose out on the compounding interest on my 401K, but, I currently have at least 25 years left to work. My reasoning is to take the loan because I’m paying an average of 23.41% on my CC, with some as high as 29.99%. The interest I pay on my 401K loan will go back to my account. Therefore, making the money work for me, instead of just sitting there doing nothing for my present day situation. My lender told me that they don’t count 401K loans and it will drastically lower my monthly payments. So I guess I’m trying to see the potential effect on my FICO score. I looked at one scoring model through Experian, and it actually showed it going down further. I was under the impression that the more available credit you have, the higher my score would be.
Any help, comments, or suggestions would be greatly appreciated.
Thanks,
M.B
