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Hello! I am buying a house and am 5 points away from getting a much lower score. I have 26% CC Utilization total, 48% on one card and 6% utilization on another and new student loans that have balances higher than the original loan amount due to accrued interest while in school. Should I use my cash to pay down my student loans so that they are lower than the original balances? Or get my CC utilization lower or pay off the lower balance of the cards? I wont be able to get it much lower than 23% total, but I can certainly pay my student loan balances to below the original amount. OR will either of these even make a difference? I just need a 5 point increase to save almost $100 a month. Please help
Thank you!
This is what I would try, but please wait for others opinions that you can weigh the best option.
Payoff the card that has 6% utilization. Overall going from 26 to 23 utilization isn't going to cross a threshold of a bump. See if you can get a credit line increase on any credit cards you have, but only as a SOFT pull inquiry that does not affect or ding your score. The increase will further decrease overall utilization.
Is this something that has to be done ASAP, ie you have a contract signed, or can you wait till the utilization is better off?
Also do you have any derogs at all, late payments, collections on any of the bureaus? Goodwill letters on lates, pay for deletes on collections can raise your scores.
You are talking your best middle score correct?
I have a couple of missed payments from 2013 and 2 collections. Do you think I can ask to have those collections removed if its been 5 years? I never heard of Goodwill letters. Unfortunately I am under contract and have about 3 weeks until closing. My CCs and student loans update at the end of this month. Im not sure a goodwill letter will be quick enough. How low do you think I would have to go on my UTL to get 5 more points?
You would almost certainly get the scoring points you need if your total CC utilization went to < 8.99%. Paying to < 18.99% might also help, though I do not know if anyone has shown a utilization breakpoint around 19% (that might just mean it hasn't been well studied).
The suggestion of paying the smaller balance card to $0 is a very good one and that might also get you some points (FICO likes it when you create as many $0 balance cards as you can, as long as one card shows a positive balance).
Do you have friends or relatives who would give you money? If they paid it directly into your credit card that might work (depositing it into your bank account is a red flag for underwriters). Be sure you get confirmation that friends giving you money in the way I describe would work. You need advice from the mortgage lenders who hang out in the mortgage forum.
Regardless your plan also needs to solve the problem of getting the new balances back to the credit bureaus quickly (e.g. by a method like Rapid Rescore).
PS. By "lower score" in the first sentence, I meant lower Interest rate.
I am unclear how it is that you could have never used a card on which you owe a positive balance. Can you explain further?
OK. So you had used it, but it went for a while without being used.
Closed accounts of that sort are not good for your score. The credit limit is $0 but the balance is positive. I think one of the veterans here (Revelate) has observed that FICO may render that as a card which has > 100% individual utilization (again, because the amount owed is > the credit limit). Cards with that kind of utilization are bad for your score.
I may have misunderstood him, however -- this was several months ago.
Regardless it is a small balance so it makes sense to pay off. Can you pay your total utilization down to < 8.99%?