One year post initial rebuild - Second round help

[Anonymous]

A little over a year ago I was working on trying to get a mortgage. I increased my scores enough for insured loan but after a lot of work on my part and mortgage broker, we were defeated by my student loans and the new(er) rules for SL DTI determination. My only way around this issue is to be above 720, or so I was told. I am not currently trying to get a mortgage and I'm glad it didn't workout last year because there were too many "if I do this, pay off this, don't do this" for my budget. New goal... Live a year or more with having done all the if's and see where I'm at. 

Currently: FICO8 674, 679, 673

I'm in Florida so I recently used a good chunk of my credit pre and post hurricane so I'm thinking first thing is first, pay it down. I'm looking for best and most efficient ways to do so and any other score improving suggestions.

No mortgage (in my husband's name only) 

No auto loans (all vehicles paid off and don't have any plans in near future of purchasing) 

No collections

No public records 

1. Iberia $5,000; balance $963; average monthly pymnt $1k (kids' private school tuition auto charges monthly) 

2. Target CC - $1,000 Balance $903; autopay $40 (ouch, but recent $300 payment hasnt shown up yet; before September my average balance was $300) 

3. Macy's $700; balance $333; autopay $50

4. Comenity VS $950; balance $87; monthly pymnt was $40-60 before 0 balance (recent CLI limit-was $710 - and 0 balance not reporting yet)

5. Comenity Ann Taylor $1,550; balance $761; mnth pymnt $60-70 (recent CLI limit - was $1310 - and payment not reporting yet)

6. Discover $4,500; balance $3,963; autopay $100 (triple ouch) 

7. Suncoast CU $5,000; balance $758; autopay $25; 30 day late 06/2016 (this is actually a closed credit card but it's lowest interest so i make minimum payments; previously told by mortgage broker that paying this off wouldnt help me as much as paying some of the others off/down so I made this a low priority. Let me know if that's wrong.)

8. FedLoan (x 11) all equal $226k. On IDR plan. Not much I can do about this but included so you can see the big picture.

There is a late car payment that should drop off in January or February (30 day late 01/2011). That's probably not impacting too much given age.

There are 8 other closed acounts with no negative reporting (Amex x2, Chase, BOA etc) but they last report in 2009 so I don't know that they do much for me.  I paid off all those accounts before starting grad school and they closed due to no activity over the next few years.

Student loans are killing me because I have some late payments that can't be removed as recent as 03/2016, another in 2015, and a few in 2014. Time is my only friend on this one.

I was thinking of changing all my autopays to minimum payments and focusing on paying down/off one or two cards at a time and work my way down the list. I also pay my husband's two CC's $100 each monthly so I can pull money from those and make the minimum payments which I assume is probably $40-$50. 

Also, I don't like the number of CC's I have and I don't like the interest rates but I don't know which, if any, I should pay off and close without negatively impacting my score. All of my cards are 5-8 years old with exception of Iberia that is a year old. I called Capital One last month to see if they could do anything about my interst rate and they told me to try back in a month or so to see if there were any available offers for me. Has asking for lower interest rates worked for anyone? 

Any help, suggestions, insights etc would be greatly appreciated. Thank so much. 

[Anonymous]

That utilization is KILLING your scores.  Your scores may go up to 720 already if you follow the AZEO Method.  If you aren't familiar with it, seem my signature for the link to my 11 rules and note the rule on the AZEO method.

FIRST: Pay off ALL credit cards to below 85% utilization.  This will account for new interest posting which might bring it above 88.9% which is considered maxed out and destroys your scores.  Get everything under 85% first.  Then get everything under 65% as you can.  Then under 45%.  Then under 25%.  Then under 5%!

1. Iberia $5,000; balance $963; This is 19.3% utilization which is lowering your scores a bit.

2. Target CC - $1,000 Balance $903; autopay $40 (ouch, but recent $300 payment hasnt shown up yet; before September my average balance was $300); This is 90.3% utilization which is considered maxed out and is really hurting your scores a lot.

3. Macy's $700; balance $333; autopay $50; This is 47.5% utilization which is lowering your scores quite a bit.

4. Comenity VS $950; balance $87; monthly pymnt was $40-60 before 0 balance (recent CLI limit-was $710 - and 0 balance not reporting yet); This is 9.2% utilization which is lowering your scores a bit -- get it below 8.9%

5. Comenity Ann Taylor $1,550; balance $761; mnth pymnt $60-70 (recent CLI limit - was $1310 - and payment not reporting yet); This is 49.1% utilization which is lowering your scores quite a bit.

6. Discover $4,500; balance $3,963; autopay $100 (triple ouch); This is 88.1% utilization which is hurting your scores quite a bit and almost maxed out which will hurt your scores more once it passes 88.9% 

7. Suncoast CU $5,000; balance $758; autopay $25; 30 day late 06/2016 (this is actually a closed credit card but it's lowest interest so i make minimum payments; previously told by mortgage broker that paying this off wouldnt help me as much as paying some of the others off/down so I made this a low priority. Let me know if that's wrong.); This is 15.2% utilization which is hurting your scores a bit.

 I would use the goodwill saturation method to try to get that late payment gone from 2016.  Keep hammering on it -- contact every VP and CxO at the lender until they decide to remove it as a goodwill gesture.  Don't relent, mail them all monthly.

Get that utilization fixed and you're going to be in 720 range.

Honestly, though?  If that $100 autopay is hurting you because you can barely afford it, a mortgage is the last thing you want.  Owning a home means surprise emergency repairs and maintenance.  I had a $7000 HVAC repair come up this year I haven't done yet, a $4500 repair last year, and next year I have to do a $12,000 roof replacement.  Renting is cheaper for a lot of people when they have to add in these random emergencies.  Be careful not to buy a home if you don't have an emergency fund set aside for 4% of the value of the home.

[Anonymous]

Thank you. I do like 0 balances. 4-5 months ago I had 0 balances on 4 cards and I loved getting those bills. I can get back to 4 cards with 0 balance by December and hopefully AZEO early next year. I hope no one is expecting much for Christmas this year because I'm over paying out so much monthly. I got the autopay rule down but it made me blind to the actual amount I'm paying out monthly. I charged about $3,500 preparing for the hurricane and post-hurricane damage but I couldn't get around that. The savings/emergency fund rule in your post stuck out for me. 

[Anonymous]

I have a condo in Florida -- 1/4 mile from the beach.  I spent something like $6000 upgrading the windows to better than the rest of the unit.  Our unit had minimal damage but some owners did have broken glass to deal with.  My unit was unscatched and the $6000 I spent should cover me for many many years to come, so I look at it as an investment, NOT a cost.

I would highly suggest creating a spreadsheet to track utilization, interest charged, payment amounts, etc.  Aim to hit those breakpoints (88.9%, 68.9%, 48.9%. 28.9%, 8.9%) equally so you can see an immediate effect on your credit scores.  If you can pay them off in the next year, the interest difference isn't going to be major (likely) but a rising FICO score might have the added benefit of auto CLIs on some of those accounts, which can help utilization organically!

Getting from here to there means budgeting and sticking to the budget.  Christmas presents can miss a year, just be honest and explain that your Christmas present to everyone is buying a home that isn't going to be a debt anchor and add stress.  More stress-free dad/brother/son is a great present to share with others for years to come.

And definitely get on your emergency savings -- even if "just" $10 per week.  

[Anonymous]

First off - do NOT close cards. Use the snowball method to pay them off, but leave them open and active. Allow one to carry a small balance of less than 10% of its limit.

For the suncoast item - how it affects you depends on how its being reported. Does it show a credit limit on your reports?

[Anonymous]

It's not the $100 payments that are killing me. I was asking if I should change all my auto pays to minimum payments and reallocate the money I'm already spending to one or two cards instead of the payments being evenly (more or less) spread out, if you know what I mean. I already pay a mortgage but it's in my husband's name so I know all about the maintenance and expense that come with owning a home. I'm not stretched to limit but I like to have money in the bank so I don't pay as much as I am able to. That's what I was planning to change so I can knock all this debt out. I'll have to run the numbers but I think I can comfortably pay everything off in 5-6 months or less if I put myself on a tighter budget. My unnecessary expenditures all relate to my kids (sports and private school) and the related monthly fuel cost. 

I am someone that needs something in front of me in black-and-white or I lose sight of what I'm trying to do. That's what I'm in the process of trying to do but I wanted to do it the most efficient and effective way possible and I'm obviously not the expert so I wanted others' insights. I very much appreciate your advice and it sounds like it will definitely work. 

[Anonymous]

Yes, the Suncoast is showing the $5k limit but it does say the account

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@Anonymous wrote:

First off - do NOT close cards. Use the snowball method to pay them off, but leave them open and active. Allow one to carry a small balance of less than 10% of its limit.

For the suncoast item - how it affects you depends on how its being reported. Does it show a credit limit on your reports?

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is closed/paying as agreed.

[Anonymous]

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@Anonymous wrote:

It's not the $100 payments that are killing me. I was asking if I should change all my auto pays to minimum payments and reallocate the money I'm already spending to one or two cards instead of the payments being evenly (more or less) spread out, if you know what I mean.

 Yep, I get it now!  I definitely would reapply your autopayments to focus on your goals -- a lot of folks prefer to see people pay off the highest interest balance first, but to me it's more important to see FICO score increases if you can plan to pay off all your balances in 12 months.  The difference between 24% and 21% over a year adds up, but seeing a literal change month to month in FICO scores is more important if you're aiming for a lending goal!

I already pay a mortgage but it's in my husband's name so I know all about the maintenance and expense that come with owning a home. I'm not stretched to limit but I like to have money in the bank so I don't pay as much as I am able to. That's what I was planning to change so I can knock all this debt out. I'll have to run the numbers but I think I can comfortably pay everything off in 5-6 months or less if I put myself on a tighter budget. My unnecessary expenditures all relate to my kids (sports and private school) and the related monthly fuel cost. 

 To me, private school is pretty important -- I don't have kids, but I support that expense for sure!  Sports is probably more difficult as a non-parent, I have no idea how one can save money there.  Used sporting goods stores?  Not a clue, but maybe a parenting "thrift" forum might help!  I grew up really poor so the only sports we could afford were "move the bricks form the front yard to the back yard and back again" lol.

I am someone that needs something in front of me in black-and-white or I lose sight of what I'm trying to do. That's what I'm in the process of trying to do but I wanted to do it the most efficient and effective way possible and I'm obviously not the expert so I wanted others' insights. I very much appreciate your advice and it sounds like it will definitely work. 

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 Definitely!  That's why I suggest you aim to build your own spreadsheet and then start tracking what changes happen.  Do you subscribe to credit monitoring?  If so, what website do you use?  Watching your scores go up as you make changes to your utilization is really helpful and it can keep you grounded in aiming for your goals!

I feel very confident that once you get your balances paid down correctly and use the AZEO Method as it exists, you will be at 720.  Please try to avoid new inquiries or new accounts, of course.  Don't close any credit card accounts yet without checking here first!

[Anonymous]

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@Anonymous wrote:

is closed/paying as agreed.

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Ah, this account will hurt your FICO score as long as there's a balance -- if an account is closed, the credit limit per FICO is $0 but any balance over $0 means FICO scores it as a maxed out account and penalizes you the most.  So getting that one paid off is very important -- and don't close any more accounts without asking about it here!

[DollyLama]

My advice, when you do payoff these credit cards, keep them open and don't close the accounts. Sock drawer them. These will one day be your oldest accounts and affects length of credit history. I could understand if you were carry a huge amount of CCs, but 7 is not by any means a large number, your payment history with them is good. It makes your file thicker also, that inquiries in future won't have such as impact. It also helps the overall utilization, for the needs of those times for emergency use on a CC. Creditors will soft pull you from time to time and like to see a progressing credit history and payment history. The ones that will not be of use, example VS, only use to charge a item about every 4th month, and pay it off the following week and few days later, to keep the account active. Creditors will and often times close accounts by "creditor grantor" rather than "at consumer's request" due to inactivity, or if trouble arises and they strip all credit lines. In the long term, it will also build up your scores come the time you do decide to seek a mortgage.