Credit score - Best option to increase?

[Anonymous]

I moved to the US in September 2018, and only recently got a credit score, which is now 639, it would be great if I could get it above 700 by the end of January...

I have two credit cards totalling 25k, both are 12 months 0% on new purchases - I thought by using these with 0% and keeping more cash for a down payment on a mortgage would be a good idea - However, I’m now thinking it’s better to pay most of this balance off and have less for a mortgage down payment?

If I was to pay off say 15-20k, would this make such a significant impact on my score to get me a better mortgage rate?

I also bought a couple new cars which has a balance of 70k, I can double monthly payments (1.5k to 3k per month) on this debt if it’s going to help my score also?!

Any advice would be much appreciated!

Thanks

[DIYcredit]

Hi,  I would pay down the credit cards to get the most credit score improvement.Because within the fico scoring model, the Amount of Debt category (which accounts for 30% of your score) credit cards debt holds alot more weight compared to installment loans  or a mortgage debt.Also if you let  one credit card report a small balance out of the two that could also add some points.On a lesser note if you paid down one auto loan that could give you some credit score points for one less auto loan balance.Having a variety of loans is better for your score than having multiple forums.The mix of credit category account only accounts for 10% of your score).I think this is the best strategy to improve your credit score.

           DIYcredit

[FireMedic1]

You got 2 cards with 25k in CL's 3 months ago. And you owe almost 20k on them already? Pay them down quick as they are maxed out. You may be balance chased and end up with a lower CL depends on who the creditor is. Which CCC did you get in with? And yes your scores will go up.

[Anonymous]

Ok thanks, that makes sense, i’ll Pay off around 15k of credit cards to bring me down to 30% credit useage and will focus on paying off one of the auto loans quicker than the other... thanks for the advice!

[Anonymous]

I just moved to the US and had to buy everything from scratch for a 4 bedroom house - Plus I like a gadget and smartphone tech... but again, makes sense what you’re saying, so will settle my credit card balances to around 30% the limits, I could pay down more if it will help my score?!

I got an Amex based on my UK Amex and my bank (Advancial) gave me a credit card also...

Thanks

[Anonymous]

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@Anonymous wrote:
Ok thanks, that makes sense, i’ll Pay off around 15k of credit cards to bring me down to 30% credit useage and will focus on paying off one of the auto loans quicker than the other... thanks for the advice!

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Paying any extra on loans will not help you in your goal, which is to buy a house.  The money you might spend on paying down loans faster would be far better spent being saved for the down payment.

Paying down credit cards is a very different.  Here you will get a big bonus to your score for doing that.  What you need to do is:

(1)  Get each card reporting at under 28.99%.  (Note that this is a different percentage than the 30% you mentioned.)

(2)  Pay off one card completely so that it reports $0.

(3)  Bring your total utilization (all credit limits for all cards combined) to under 8.99%

Those are listed in order of priority, but if you can do all three at once that is even better.

Can you confirm that you have only two credit cards?  Your initial post says that you have two cards that have debt on them.  That would leave open the possibility that you might have one or more cards with a zero balance.

Once you get the cards reporting as per above, you need to:

(a) Confirm that the new balances are reporting at all three bureaus.  You can do this with some free tools we can recommend.

and then (b) pull your three mortgage sores.  These are different from other credit scores you might be seeing.  You can get these by signing up for the myFICO Ultimate service here (I'd choose the $40/mo option).  If you think you will be buying your house very soon then you might continue to keep the service active.  Otherwise you can cancel the service a week after you get all your scores.

[Anonymous]

Thanks for the advice - I could do all three for sure - What’s the significance of the 28.99% rather than 30%? Also, I heard it’s bettwr to have a balance on a credit card and continue to make minimum payments to build up a credit history, is this in accurate?

I only have the two credit cards (in the US), so no others with zero balance.

Thanks again!

[HeavenOhio]

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@Anonymous wrote:
What’s the significance of the 28.99% rather than 30%? Also, I heard it’s bettwr to have a balance on a credit card and continue to make minimum payments to build up a credit history, is this in accurate?

It doesn't impress anyone if you revolve a balance. Current FICO scoring models care about balances only. They don't care about how you get to those numbers. The best look is one card with a small positive balance, with the other reporting zero.

From a financial standpoint, you don't want to pay interest. Paying your statement balances in full will avoid that. In your case, you have 0% interest on your cards. As long as you're in your introductory period, all you have to do is bring your balances down.

You want 28.9% because for utilization, FICO rounds all fractions up. 29.0000001% rounds up to 30%, making it no longer "under" 30%.

Because it doesn't seem to be daunting you to pay your balances down, I'd go for AZEO (all zero except one) on your cards. Leave a small positive balance on one card (at least $5 but not much more), with the other reporting zero.

You can still use your cards as much as you want in the meantime, as long as you control the balances that report. Holler if you need instructions on how to make that happen.

[Anonymous]

Ok thanks, I’ve just settled my credit cards down to 25%, but one of which I settles to the statement balance, which I asssume bringsnit down to $0? So not sure what total utilization would be...

I’ll post the outcome pending the next credit score update...

Thanks everyone!

[RonM21]

As the rest have said, focus on getting your credit balances down. The loans are so new and high that you would be better served taking care of your CC's. Even when you do that, there is no guarantee that your score will jump as much as you would like. But you should see at least a noticeable difference depending on how much you bring that utilization down. Best of luck on your goal!