Increasing 2, 4, 5 quickly

[creditfrustrated01]

I have found myself in a credit bind where my credit utilization is at 100% across 7 credit cards.  I am seeking a HELOAN and have run into an issue where my mid score is 678 (675, and 715 are the other 2).  I need a mid of 680 to qualify for the loan I am seeking with my preffered lender.  I have 100% on time payments and no derogs on my reports.  Im seeking the loan to pay off all credit cards and basically swap the debt for a lower interest rate which should save me in the neighborhood of $1400 a month.

This may seem like a simple or silly question, but I need to raise my mid by 2 pts quickly.  I have decided to sell a few assets which should generate about 8k. In anyones experience, will paying off at least 10% (6k) of that credit card debt raise the 2, 4, 5 score by those 2 pts? I know I will have to wait for the credit cycle to run its course but I believe all cards should report in the next 2 weeks (end of month).  My other option would be to apply that towards my mortgage as additional principle, but I dont know that that will do anything other than lower my loan to value ratio on the existing mortgage for the HELOAN.  

I just want to apply that money in the most efficient manner

[JoeRockhead]

Reducing the utilization on your revolving credit card debt will have the greatest positive impact on your scores. Without more detail about the cards you have, their limits and balances, it will be hard for anyone to suggest the best usage of the $8k you have to throw at it. 

[creditfrustrated01]

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@JoeRockhead wrote:

Reducing the utilization on your revolving credit card debt will have the greatest positive impact on your scores. Without more detail about the cards you have, their limits and balances, it will be hard for anyone to suggest the best usage of the $8k you have to throw at it. 

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Limit                          Balance

24,600                      24,320          

4,250                         4,186              

11,000                       10,645           

2,500                         2,218             

10,000                      9,961

2,975                          2,870

1,250                          1,212

1,250                          1,239

4,000                        0            (store card)

6,000                        0            (store card)

4,500                         0            (store card)

2,000                        0             (store card)

$74,325 in limits                  $56,654 utilized

So all of my standard cards are at essentially 100% utilization.  Store cards are at 0% utilization. Would it be best to spend the 8k as an even percentage across accounts or best to pay off 3 of the smaller and spread the rest as a percentage?

[Thomas_Thumb]

Take balances down on all cards to under 89% utilization. Card utilization levels at 90% and above are considered maxed out and subject to additional penalty. Unfortunately, they may balance chase you. If they do your utilization will remain high.

Another option is to pay off your 2 or 3 lowest balance cards so more report $0 and apply the remaining funds to paying down other card balances. This is the better approach - IMO. The Mortgage Ficos penalize a lot for too many cards with balances. Get to 50% or less cards reporting balances.

[creditfrustrated01]

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@Thomas_Thumb wrote:

Take balances down on all cards to under 89% utilization. Card utilization levels at 90% and above are considered maxed out and subject to additional penalty. Unfortunately, they may balance chase you. If they do your utilization will remain high.

Another option is to pay off your 2 or 3 lowest balance cards so more report $0 and apply the remaining funds to paying down other card balances. This is the better approach - IMO. The Mortgage Ficos penalize a lot for too many cards with balances. Get to 50% or less cards reporting balances.

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Based on what I am seeing in my credit alerts, paying off cards seems to be the biggest gain of pts.  I can pay 3 off which will put my cards with zero balance at 7 and 5 remaining with a balance.  I don't think I will get limit chased as I pay down due to my history but it is a possiblity.  My maxed out history is short.  My high limit history is longer, but I have always paid more than minimums.

[SouthJamaica]

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@creditfrustrated01 wrote:

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@Thomas_Thumb wrote:

Take balances down on all cards to under 89% utilization. Card utilization levels at 90% and above are considered maxed out and subject to additional penalty. Unfortunately, they may balance chase you. If they do your utilization will remain high.

Another option is to pay off your 2 or 3 lowest balance cards so more report $0 and apply the remaining funds to paying down other card balances. This is the better approach - IMO. The Mortgage Ficos penalize a lot for too many cards with balances. Get to 50% or less cards reporting balances.

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Based on what I am seeing in my credit alerts, paying off cards seems to be the biggest gain of pts.  I can pay 3 off which will put my cards with zero balance at 7 and 5 remaining with a balance.  I don't think I will get limit chased as I pay down due to my history but it is a possiblity.  My maxed out history is short.  My high limit history is longer, but I have always paid more than minimums.

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I agree with @Thomas_Thumb that with the mortgage scores the fastest way to gain points is to pay more accounts down to zero.  So in your case that means paying off the four smallest balances,

2,218

2,870

1,212

1,239

IMHO the most efficient use of the remaining $461 would be to spread it around on those 4 accounts to cover trailing interest that will pop up and possibly spoil your zero balance plans.

[Cowboys4Life]

You haven't said who your preferred lender is but let me give you some insight into the HELoan process.  Raising your score 2-3 points isn't going to get you approved.  I have over $120k in equity in my home.  I make all the payments ON TIME for 5 years and always a bit more to bring the principal down faster.  I wanted a HELoan to consolidate cc debt that was less than 20k to one simple payment (along with closing those cards with a zero balance) and despite my score being above 700 with 2 of my cards over 90% they put me through the ringer and then wanted me to refinance the home from a 2.5% mortgage to a  7% one claiming it would "save me money" in the long run which was a LIE.  They will string you along demanding documents and all kinds of "steps" to get approval and in the end will deny it because you owe money on those cards.  HELoans are only approved if you are doing a renovation and don't owe anyone or just plain don't owe cc debt.  I opted to tell the guy from USB to pound sand and blocked his number and email.  I am using the snowball method and it is going great.  I am much happier and glad I didn't refinance to a rate 3 x higher than my current one.  Just focus on paying that debt down and you will be better off.  Good luck.

[creditfrustrated01]

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@Cowboys4Life wrote:

You haven't said who your preferred lender is but let me give you some insight into the HELoan process.  Raising your score 2-3 points isn't going to get you approved.  I have over $120k in equity in my home.  I make all the payments ON TIME for 5 years and always a bit more to bring the principal down faster.  I wanted a HELoan to consolidate cc debt that was less than 20k to one simple payment (along with closing those cards with a zero balance) and despite my score being above 700 with 2 of my cards over 90% they put me through the ringer and then wanted me to refinance the home from a 2.5% mortgage to a  7% one claiming it would "save me money" in the long run which was a LIE.  They will string you along demanding documents and all kinds of "steps" to get approval and in the end will deny it because you owe money on those cards.  HELoans are only approved if you are doing a renovation and don't owe anyone or just plain don't owe cc debt.  I opted to tell the guy from USB to pound sand and blocked his number and email.  I am using the snowball method and it is going great.  I am much happier and glad I didn't refinance to a rate 3 x higher than my current one.  Just focus on paying that debt down and you will be better off.  Good luck.

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I will certainly not be refinancing.  I have a 2.375 rate that I will never mess up.  The difference between the 678 and 680 is the sticking point on the loan currently.  All options open up to me at 680. Everything else is in place and ready to go.  I am doing this through the same lender I bought the home with due to our first experience, which was very pleasant.  The reason for the loan is that I am currently backed into a corner with no room to breath.  Any small catasrophe will be a major problem financially.  If the car breaks down and I have a $2,000 repair bill, I won't be able to pay it. I am commissioned sales so my check value is never a guaranteed amount.  I overextended us with a lot of acquisitions for our property the past 4 years during record profits.  So if we wanted it, we either paid cash or put it on credit. And as the story goes, the best laid plans of mice and men often go awry. The plan is to go hardcore on the HELoan during my good months so I can get back to normal while having the credit and some cash available for those minor life catastrophes.  

[Thomas_Thumb]

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@creditfrustrated01 wrote:

Based on what I am seeing in my credit alerts, paying off cards seems to be the biggest gain of pts.  I can pay 3 off which will put my cards with zero balance at 7 and 5 remaining with a balance. 

... My high limit history is longer, but I have always paid more than minimums.

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Paying off 3 cards is a good plan. As SJ mentions, ensure payments cover any trailing interest. Then use the remainder to continue to pay more than the minimum on the other cards.

Once you have the new loan, get all cards under 89% ASAP. Then put focus on paying down your highest APR cards.

[creditfrustrated01]

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@Thomas_Thumb wrote:

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@creditfrustrated01 wrote:

Based on what I am seeing in my credit alerts, paying off cards seems to be the biggest gain of pts.  I can pay 3 off which will put my cards with zero balance at 7 and 5 remaining with a balance. 

... My high limit history is longer, but I have always paid more than minimums.

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Paying off 3 cards is a good plan. As SJ mentions, ensure payments cover any trailing interest. Then use the remainder to continue to pay more than the minimum on the other cards.

Once you have the new loan, get all cards under 89% ASAP. Then put focus on paying down your highest APR cards.

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That will be my plan on the 3 cards.  All minimums have been paid until the next cycle which happens over the next 10 days across the cards.  Bonus news is my sell off netted 10k so a little more to work with than I was originally budgeting.  Payoff of 3 cards including trailing interest.  Pay remainder of cards to 89% including trailing interest will be $10,750 approximately.  It will be a tight month from there until Loan goes through.  But, that is the predicament I put myself in.  

Once loan goes through all cards will be paid off completely.  Swapping that higher interest for the lower interest loan with a payment that is more manageable during tighter months.  Will also have operating capital in the kitty in order to stay off the cards.