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Need advice with debt for future mortgage

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Need advice with debt for future mortgage

I am 31 years old and want to buy a house in the next few years. I'll list my accounts below. I'm employed full time, have a side hustle, and currently rent. I read somewhere I shouldn't open new accounts within a year (?) of planning to get a mortage, but I'm about 4.5 years away from being out of CC debt. I would like to open a new account for a balance transfer on at least my smallest balanced card, but don't know if I should. I recently got a Lending Club loan and paid off my highest interest cards.

 

I have 4 inquiries and my FICO score hovers right around 700. It was 715-720 before I opened my Wells Fargo credit card and Lending Club accounts this summer.

 

I'm paying $100 extra a month, avalanche method. I get $1,000 bonus each December from work and since I live in AK, I will get an extra $1,600 this October for the Permanent Fund Dividend check. I usually use my PFD and tax returns to pay 6-months in advance for my car insurance and apply what is left to paying off debt.

 

I screwed up by letting a friend use a card and never got paid back, but that's only a small portion of my problem. The rest was young, dumbness combined with living off credit cards while not working during college and a during a stint of unemployment.

 

I feel like I'm on mostly track with my payments (even though its slow-going and at times overwhelming), but I'm trying to think long-term because I would like to be a homeowner soon(ish). I spoke with a mortage broker this spring, who said I need to either cut my debt by 1/3 or make a lot more money to afford a decent, single-family home. I'm OK with waiting, I just would like to find some balance transfers to cut down on interest in the meantime without having too many inquiries/accounts. If anyone has any thoughts around this, I would appreciate it!

 

TIA

 

 

Card -- Interest Rate  -- Current Balance  -- Limit   -- %  Used -- Age of Account

JC Penney Mastercard -- 26.99%  $0 / $2,000.00 -- 0.00% -- 3y1m

Lowes -- 26.99%  $0/$7,000.00  -- 0.00% -- 3y2m

Wells Fargo -- 26.74%after 10/2020 -- $1,854.72 / $3,000.00 -- 61.82% -- 4m (opened for BT)

AmEx -- 26.24% after 11/2019 -- $248.08/$3,100.00 (PIF used for phone&internet autopay) -- 8.00% -- 1y10m

Barclaycard -- 19.99%  $/$8,000.00  -- 0.00% -- 4y11m

Discover -- 18.49%  $0/$20,000.00  -- 0.00% -- 1y11m

Sears Mastercard -- 17.49%  $0/$10,000.00  -- 0.00% - 9y2m

Chase 17.24% (but most balance is from 16.24% rate)  $14,481.87/$15,500.00 -- 93.43% -- 9y2m

Capital One -- 17.15% --  $0/$5,000.00 -- 0.00% -- 8y10m

Capital One -- 17.15% -- $1,716.74/$2,500.00  -- 68.67% -- 11y4m

Nordstrom -- 14.90% -- $0/$750.00  -- 0.00% -- 6y10m

Bank of America -- 13.49% (1/2 of balance is 0% thru 02/2020)  -- $9,861.99/$10,600.00  -- 93.04% -- 11y11m  

total credit cards  $28,163.40/$87,450.00 -- 32.21%  

 

Lending Club 13.74%  -- $14,036.34/$14,400.00  -- 97.47% 3m (60m term)

Message 1 of 13
12 REPLIES 12
Valued Contributor

Re: Need advice with debt for future mortgage

Since you’re a few years away from a mortgage, don’t focus on that - focus on straight finances. Your scores will naturally fall into place as you clear debt.

The big ones to worry about are the two cards over 88.9%. Those are considered maxed out and are a worry. Even on a BT, Chase in particular wants to see it paid down with particular attention. Use all funds that you can spare to at least get them to 87% to get out of maxed out territory and gain a little breathing room.

You could talk to your bank and ask whether, once you’re below the maxed out threshold, you could look into a personal loan to wipe out the smaller balances to zero those cards. If it’s a CU, you could probably get a very low rate.

You could look at the Amex ED card for balance transfers but Amex caps BTs at $5000 so that may not buy you much. You could ask Discover for a BT too as they’re known for them, and if approved for enough, you could see about moving $7500 from Chase and $4800ish from BoA to Disco. That should get both of those very near the 48.9% threshold while putting Disco at 61.5%, which is elevated but not danger zone, and I think overall you’d be in better shape than now. Then just keep pounding down the balances as you can. With $2600 coming from bonus and the PFD, that would pay off Wells Fargo and half of CapOne’s balance, buying you another PIF card and allowing you to roll the payments on WF into the other debts.

You’d have to assess each option and you may have other ideas too, but maybe this can help you get started.


Rose Gold | BCP | Delta Gold | Hilton Surpass | Hilton Honors | IT Cash | IT Chrome | Quicksilver | Target | VS | Home Depot | Lowes | Firestone | Wayfair | Kohl’s

5/24, 1/24, 76445/24, who cares #HappyWithAmex





Entering the garden 5/27/2019, staying until 2020




Message 2 of 13
Senior Contributor

Re: Need advice with debt for future mortgage

 

@annpalmer    Welcome To myFICO Forums!

 

Congrats on wanting to become a homeownerSmiley Happy

 

 

 

Message 3 of 13
Contributor

Re: Need advice with debt for future mortgage

Good on you for taking control of your finances. ITD makes a good point that as you pay off debt your scores will fall into place naturally.

What kind of income are you working with, combined from all jobs/sources? The issue I’m seeing is in the grand scheme $100/mo extra on $42k isn’t much. Not undermining your efforts by any means but I bet you could do better. Have you made a budget yet? Paused retirement? Can you cut expenses AND get your income up to where you’re putting $1k+ per month towards the debt?
Message 4 of 13
Member

Re: Need advice with debt for future mortgage

I use my PFD for that too

Message 5 of 13
New Member

Re: Need advice with debt for future mortgage

ITD, Discover lowered my APR last month (from around 24.99 or something to 18.49). I did have a BT offer, but it is now gone--I presume I'll get another offer after a few bill cycles at the lower rate?

 

Is it worth the higher APR on a BT to reduce the utilization on the BoA/Chase cards to under the 50% threshold?

Message 6 of 13
Valued Contributor

Re: Need advice with debt for future mortgage

I can’t say for sure that they’ll send another offer but they may. You can call them too and explain what you’re looking to do, and ask if they’ll ok a BT to cover the amounts you want to move over. I’ve seen posts in the past where people have asked for a BT to be made available and have had it granted.

As for how it’ll look, I do think it’ll be better. Part of FICO scoring includes penalization for the highest utilization you show on any one card if it’s beyond the 28.9% breakpoint, so that’ll mainly be a wash regardless. But by doing this, you’ll remove two maxed out balances and bring them back near 50%, which is most assuredly a better situation, as you won’t have as much of a high-UTI penalty but more importantly you’ll get two cards out of the danger zone and likely save yourself from AA by those lenders. If they were to take AA in balance chasing or account closure, the ripple effect could be catastrophic for your profile.


Rose Gold | BCP | Delta Gold | Hilton Surpass | Hilton Honors | IT Cash | IT Chrome | Quicksilver | Target | VS | Home Depot | Lowes | Firestone | Wayfair | Kohl’s

5/24, 1/24, 76445/24, who cares #HappyWithAmex





Entering the garden 5/27/2019, staying until 2020




Message 7 of 13
New Member

Re: Need advice with debt for future mortgage

Soooooooooooooo here's the rub....I can't afford to pay more right now. But (more below) I just ended a relationship which should free up some money. My single biggest problem is not saying No to others--but I'm getting better!

 

I make just around $50k/year gross (all sources). I contribute 3% to my 401(k) (that's the max match amount). I have about $17,500 in a State of AK retirement account. I have about $2,000 cash in the bank (like, that I can go into and withdraw right now), and another $6,600 in an online HYS account. The online savings is what's left after I got a chunk from my grandma last fall. I don't know whether to tap this or let it sit there. I mean... I KNOW mathematically it makes more sense to apply it to debt, but I have peace of mind knowing it's there.

 

I make $1225 bi-weekly after taxes (=$2654.17/month) from my full-time job.

$1095 rent

~$80 electric

~$100 heat

~$80 auto insurance (I usually pay 6-months though with my annual PFD in the fall and tax return in spring)

$160 internet and cell phone

$313.24 Lending Club

$560 credit cards (minimum + $100)

I do not have a car payment.

 

This leaves me with $245.93 for everything else. Any money I need on top of that comes from hairdressing. I make my own schedule, but only when I have clients. I take clients in evenings and on Saturdays for about a dozen regulars.

 

My rent is high, but I have a fenced yard for my two dogs, which is super hard to find. I've moved around a LOT since I started college and dread the thought of moving. Not only saving up for a new S/D and first month's rent, but the thought of the moving processes itself--the packing, the cleaning, the hauling, all of it!--makes me want to cry. And I'm not willing to get rid of my dogs.

 

I recently ended a long-term relationship, in which I was the sole provider. I was paying the rent myself before, so housing costs won't increase with just me (utilities will go down a bit). He didn't work, and I spent more on his gas and groceries than my own, so I should have *some* more money now that we're broken up, which will be nice. I make about $500/month through hairdressing, so usually that money went to us him.

 

Edit: My boss is drumming up some additional businesses that can lead to me receving commissions ($3-5k deals) in the next year or so... but definitely no guarentees there.... If that comes remotely into fruition I'll sock some away for taxes (it won't be taxed is my understanding in the way it'll be set up) and use the rest for debt.

Message 8 of 13
Super Contributor

Re: Need advice with debt for future mortgage


@annpalmer wrote:

I am 31 years old and want to buy a house in the next few years. I'll list my accounts below. I'm employed full time, have a side hustle, and currently rent. I read somewhere I shouldn't open new accounts within a year (?) of planning to get a mortage, but I'm about 4.5 years away from being out of CC debt. I would like to open a new account for a balance transfer on at least my smallest balanced card, but don't know if I should. I recently got a Lending Club loan and paid off my highest interest cards.

 

I have 4 inquiries and my FICO score hovers right around 700. It was 715-720 before I opened my Wells Fargo credit card and Lending Club accounts this summer.

 

I'm paying $100 extra a month, avalanche method. I get $1,000 bonus each December from work and since I live in AK, I will get an extra $1,600 this October for the Permanent Fund Dividend check. I usually use my PFD and tax returns to pay 6-months in advance for my car insurance and apply what is left to paying off debt.

 

I screwed up by letting a friend use a card and never got paid back, but that's only a small portion of my problem. The rest was young, dumbness combined with living off credit cards while not working during college and a during a stint of unemployment.

 

I feel like I'm on mostly track with my payments (even though its slow-going and at times overwhelming), but I'm trying to think long-term because I would like to be a homeowner soon(ish). I spoke with a mortage broker this spring, who said I need to either cut my debt by 1/3 or make a lot more money to afford a decent, single-family home. I'm OK with waiting, I just would like to find some balance transfers to cut down on interest in the meantime without having too many inquiries/accounts. If anyone has any thoughts around this, I would appreciate it!

 

TIA

 

 

Card -- Interest Rate  -- Current Balance  -- Limit   -- %  Used -- Age of Account

JC Penney Mastercard -- 26.99%  $0 / $2,000.00 -- 0.00% -- 3y1m

Lowes -- 26.99%  $0/$7,000.00  -- 0.00% -- 3y2m

Wells Fargo -- 26.74%after 10/2020 -- $1,854.72 / $3,000.00 -- 61.82% -- 4m (opened for BT)

AmEx -- 26.24% after 11/2019 -- $248.08/$3,100.00 (PIF used for phone&internet autopay) -- 8.00% -- 1y10m

Barclaycard -- 19.99%  $/$8,000.00  -- 0.00% -- 4y11m

Discover -- 18.49%  $0/$20,000.00  -- 0.00% -- 1y11m

Sears Mastercard -- 17.49%  $0/$10,000.00  -- 0.00% - 9y2m

Chase 17.24% (but most balance is from 16.24% rate)  $14,481.87/$15,500.00 -- 93.43% -- 9y2m

Capital One -- 17.15% --  $0/$5,000.00 -- 0.00% -- 8y10m

Capital One -- 17.15% -- $1,716.74/$2,500.00  -- 68.67% -- 11y4m

Nordstrom -- 14.90% -- $0/$750.00  -- 0.00% -- 6y10m

Bank of America -- 13.49% (1/2 of balance is 0% thru 02/2020)  -- $9,861.99/$10,600.00  -- 93.04% -- 11y11m  

total credit cards  $28,163.40/$87,450.00 -- 32.21%  

 

Lending Club 13.74%  -- $14,036.34/$14,400.00  -- 97.47% 3m (60m term)


IMHO borrowing is not the answer, paying down your revolving debt is the only answer.

 

I recommend that you use the snowball method.


Total revolving limits 719k (592500 reporting) FICO 8 scores: EQ 735 TU 782 EX 746
Message 9 of 13
New Member

Re: Need advice with debt for future mortgage

Any thoughts on using my HYS? As stated above, I like the peace of mind of having it, but I know mathematically it's better to apply it towards debt. I don't have a plan for what that would look like: use it all? pay $500? pay $2500? etc. I have $2000 in the (physical) bank... well, credit union but either way. I'm very secure in my full-time job (it's hairdressing that fluctuates) but not sure how much to keep.

 

$2500 is my goal for in the bank, as it will be approx. 1 month and I don't have many expenses I can use CCs for if I were to need to (e.g., rent, and current min payments I can't use cards for if I lose my job, but could use cards for internet/cell, gas, electric, and car insurance, along with gas and groceries).

 

the $6600 online HYS is my hoard lol

Message 10 of 13
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