Been long time

[Azuieldrago]

Hello my fellow MyFICO-ers been awhile since being here. So question, this covers alot of things but its about getting a construction home loan. So I am a vet so I do have the VA home loan thing too. So back in 2019 I filed for BK7 due to medical bills. I was building back nicely but sadly had another heart attack in 2021 plus a stroke in 2023. Yeah that sucked big. Due to such a rapid and long stretch on being on medical leave (FMLA) my savings and credit card bills maxed out with alot of lates 30, 60 90 and 120. Since then I got backon track but with some High balances that are slowly coming down. So my question is, I have an auto loan that I have and have less then a yr left of payments ($4750) and one $1200 loan so I had some breathing room. So my question is I want to build a house, should I pay off my auto loan ($600 a month) now as an early payoff since have my credit cards and small loan. Or should I just finish out the yr to keep it running on my report? 

So here are the details 

-100% own the land no expense no taxes (100% disabled vet)

-Bills and manageable with a small 5 figure safety net saved.

-VA Home Loan. Yes can be used for new construction. Just not every bank allows it

Just ask if more info is needed or clarified. Thank you.

[radiofrequencies]

I would pay down what ever debt has the highest interest rate first. There's no benefit from making more payments on your auto loan rather than paying it off early, but if your credit card balances have higher interest rates, your money is better served going towards the cards.

[ShanetheMortgageMan]

I wouldn't pay off the auto loan now, if the $600/mo payment is an issue for the DTI, then you can just pay it at closing in order to exclude it.

The equity in the land can be used to absorb some or all the closing costs the VA construction loan comes with.  The $10k+ you've saved can help get an automated underwriting approval, which is what most VA construction loan programs require (not many manual underwrite VA construction loans out there).

It seems like your credit cards may be paid off, but if not then I'd make it a priority to do the AZEO method by the time your credit is checked, to maximize your credit scores.   

[Thomas_Thumb]

Keep the auto loan going with scheduled payments. Focus on paying down and off CC balances. In addition to being better financially, CC paydowns will have a greater positive impact on Fico score.

You do not mention how many CCs you have, how many are carrying balances or utilization levels on cards with balances. A few key milestones are: reducing all cards reporting balances to under 29% utilization, paying off some low balance cards so no more than 50% of cards report balances. Then get aggregate revolving utilization to under 9% through a combination of paying cards to $0 and further balance paydowns.

As mentioned above, if dti is a concern down the road, payoff the auto loan at or shortly before close.

Knowing your Fico scores along with CC balance/credit limit info by card would be helpful in assessing your situation.

[Azuieldrago]

At the moment I have

11 cards total

3 at 30% now making min payments to concentrate on cards.

8 at higher balances but working on. 3 at a time.

1 Auto loan that has 1 yr left - 6 yr term at yr 5. Last payment in May 2027

1 Rec loan that basically is brand new 8 yr term at year 2

1 small personal loan less then 3 months old with a balance of $1200

A BK7 off report in 2029

Just have to get rid of those 30, 60, 90 day lates and BK7. Stupid health issues.

[Thomas_Thumb]

Thanks for the info. A few other Fico utilization score boosting milestones are:

1. Ensure no card is reporting a max out condition as that adds its own penalty. Max out is defined as 89% or higher card utilization.

2. Get atleast 1 card to report $0 balance. If 100% report balances (unless you only have 1 or 2 cards), EQ score 5 will penalize score severly. TU score 4 imposes a siginificant penalty but less than EQ.

3. Getting all individual cards befow 49% UT is an important score boosting milestone.

4. Getting aggregate revolving utilization below 29% is an important milestone.

5. Avoid further new credit.

[Azuieldrago]

Yeah thats what I plan do to. Get all cards down to 30% then switch to pay off. Reserve one card to handle subscriptions to pay off each month. another as a daily if needed to handle things like gas, groceries with monthly payoff as well (can be same card if subscriptions are cheap enough) and a high limit card for emergencies or high cost items that may take a few payments to get back to 0% otherwise just to collect dust or aleast used to stay active. So 1-2 cards to be used regularly on a rotation to prevent account closure and 1 card for oh crap moments or pretending to be Slenda rich.