Debt consolidation loan before applying for a mortgage

[Anonymous]

I need some adice. I am looking to apply for a mortgage this Fall and have been steadily improving my scores over the past year and the next item on my plan is to get my utilization down on my credit cards. They are killing my scores so here's the break down.

Utilization rate is at 84% ($9,460/$11,250)

Wells Fargo @ $9,460 / $9,650
Credit Uniion Visa @ $0 / $1,000
Credit One Bank @ $0 / $600

There are several debt consolidation loans which I am considering which will zero out the Wells Fargo card. I have zero inquiries for EQ and EX and one with TU. My DTI is around 10%, I make $140k, and here are my most recent scores.

TU: 656
EQ: 679
EX: 620

My dilemma is will taking out a loan hurt more than help seeing how I am applying for a mortgage in 2018? Also, can anyone ballpark the kind of bump I should see with a utilization <2% since I'll keep a small balance on one card? Will it be worth it?  My payment history is at 97%, but I've already sent a GW letter to my credit union since I have five 30 day lates with them over the past five year.  The most recent in 2016.  I'm positive I can get at least three removed.

If there is anymore info that would help please let me know.  I'm hoping to be around 720 when I apply.  Thank you in advance!

[NC_Mtg_Loaner]

Why not just pay the card down in the next couple months?

[marty56]

Be carfull of those types of loans.  If the are a CFL loan, it will hurt your score.  IMHO moving debt around is not a good idea.  Just pay down the CC as much as you can.

[Anonymous]

Your numbers aren't adding up.  Gross income of $140k means a monthly net take-home of maybe $9000.

What are you spending your net income on exactly?

Just pay the card off in 1-2 months.  No need for a loan.

[IQn2D]

I was about to say the same thing about his/her income. He should be able to pay down his debt within two pay periods. However, there maybe more debt than he is mentioning.

[Anonymous]

I mentioned DTI as it pertains to a mortgage.  My understanding is that this is what is included:

• Mortgage Payments
• Real Estate Taxes(If Escrowed)
• Home Owner’s Insurance (If Escrowed)
• Car Loan Payments
• Student Loans
• Credit Card Payments
• Time Share Payments
• Personal Installment Loans
• Child Support
• Alimony
• Any Co-Signed Loans

I am married with three kids and we do have additional expenses (utilities, Insurance, etc.) and live in Southern California where the cost of living is high.  I will also have 20% to put down and I am socking away everything I can for moving related expenses.  Thanks again!

[Anonymous]

You’ve received good advice from the other members. I’m going to give my two cents on my experience with your “dilemma “ and this is no way advice, just my experience.

Two years ago my daughter was in a similar utilization situation as yours. She had a NFCU card with a $5k limit and a $4920 balance along with a maxed out $500 navchek account and was sinking fast. Her EX scores went from 730’s down to around 659. She only had one 30 days late which was over a year old. So, I believe her utilization was a main factor as to the big drop. She decided to try for a debt consolidation loan but the best one available was at a whopping 30.99%, but her monthly payments were in her price range.

I told her to get the loan pay off her cards and in about 6 -12 months try to refinance the loan. She took the loan and paid all her revolving debt. As soon as her new utilization and loan reported, her scores jumped 42 points. Four months later she was in the high to mid 730’s and refinanced the loan to 11.99%. So it can have a positive effect provided you don’t add more debt and it doesn’t increase your DTI beyond thresholds.

Now here’s my 7.5 months credit timeline: 5/17 new car purchase, 6/17 refinanced a previous and different car loan thus reporting as a new trade line, 6/17 personal loan for over twice the amount you have listed. 7/17 decided to purchase a home and applied for pre approvals (5), all hard pulls between 7/25-8/11/17. Received various pre approvals on all. Mid score 711 EQ. Closed escrow and moved into a new home 11/17.

As you can see I did everything you are not supposed to do prior to going for a mortgage and was still approved without any hiccups. So is it possible? I’m living proof of that. Would I recommend it? Probably not, I truly believe I was blessed throughout the process, I cannot even call it an ordeal. Good luck in your journey and decision. Please excuse any typos, I’m on my phone.