Is Paying Down a Line Of Credit The Quickest Way to Raise Score?

[Anonymous]

Hi!  Just a question...my husband needs to raise his score by 20 points in order to apply for an FHA loan.  He seems to be stuck at 595 and it is taking forever to make things happen!  He has a credit line at a local bank which has a limit of $2500 and has been paid down to $1600.  Would paying this down to about $500 do the trick as far as raising the points quickly?  He had 2 very low limit credit cards which had been charged off about 3 years ago but are still being reported as open....is this what is hurting the score?  Should we just pay those off?  I don't want to do the wrong thing, but it is so confusing! 

[Anonymous]

Hi and welcome to the forums.

Paying off the bank loan is not going to help much, if at all.  It is considered an installment loan and they have little bearing on a FICO score.

The COd credit cards are killing his score.  But, whether you pay them or not the damage is going to be the same.  These balances are counting in his overall utilization which is also hurting his score.  Is there a CA reporting along with the OC?

Are these credit cards his oldest accounts?

You can contact the OC and ask if he pays in full if they will update his account to a paid as agreed status and remove the CO annotation.  If not, ask if they will delete the entire account from his CR.  The points he would lose for AAoA should be little compared to what he will gain from having a CO removed.  Also, if you just paid the account, the balances would no long count toward his utilization but I don't think it would raise his score 20 points.

[Anonymous]

Is the line of credit reporting as revolving?  If revolving, paying it down to 9% or less will give him a significant jump.  If not, it will not really help.  Paying off those charge offs will probably alert the card issuers that they're not reporting correctly, and will probably change that reporting to charge off with $0 balance. 

[Anonymous]

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@Anonymous wrote:

Is the line of credit reporting as revolving?  If revolving, paying it down to 9% or less will give him a significant jump.  If not, it will not really help.  Paying off those charge offs will probably alert the card issuers that they're not reporting correctly, and will probably change that reporting to charge off with $0 balance. 

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Not really, considering the 2 COs that are reporting.  Even if they paid and it updates to a 0 balance, that only helps utilization.  The CO is what is killing his score.

[Anonymous]

True, but utilization is 30% of score, if I remember right. 

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guiness56 wrote:

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mauve wrote:

Is the line of credit reporting as revolving?  If revolving, paying it down to 9% or less will give him a significant jump.  If not, it will not really help.  Paying off those charge offs will probably alert the card issuers that they're not reporting correctly, and will probably change that reporting to charge off with $0 balance. 

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Not really, considering the 2 COs that are reporting.  Even if they paid and it updates to a 0 balance, that only helps utilization.  The CO is what is killing his score.

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[Anonymous]

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@Anonymous wrote:

True, but utilization is 30% of score, if I remember right. 

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@Anonymous wrote:

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@Anonymous wrote:

Is the line of credit reporting as revolving?  If revolving, paying it down to 9% or less will give him a significant jump.  If not, it will not really help.  Paying off those charge offs will probably alert the card issuers that they're not reporting correctly, and will probably change that reporting to charge off with $0 balance. 

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Not really, considering the 2 COs that are reporting.  Even if they paid and it updates to a 0 balance, that only helps utilization.  The CO is what is killing his score.

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Yes, utilization is 30% for a revolving account, 10% for an installment account.  My point is, just paying off the loan, even if it is listed as a revolving, will have little impact because of the 2 COs.

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