Questions for the Experts on Personal Situation

[SSgtUSMC]

Hello to all from Iraq.  I am in the military deployed to Iraq for 7 months(2 down) and will be using this time to pay some bills.  I am looking to buy a house when I get back so I have some questions and ask for feedback from all you experts.  ANY guidance is greatly appreciated.

Started deployment with:  OWE/LIMIT

Military Store Credit Card: 5,300.00/7,750.00      

Credut Union Visa: 3,700.00/6,000.00

MasterCard: 1,400.00/3,000.00

Capital 1: 300.00/500.00

Credit Union Checking Line of Credit: 1,300.00/2,000.00 

Truck payment: 13,500.00

As of today:  OWE/LIMIT

Military Store Credit Card: 4,600.00

MasterCard: 1,000.00

Truck Paymet:13,000.00

As you can see I have paid off most of my debt but when I pulled of my FICO credit score a few days ago I had a 682(new balances haven't been updated on any of my credit reports)(I also have a collection that I am trying to get removed).

Is this a good score and/or how can I improve it?  I plan on having everything paid off minus my truck in 3-4 months.

I have money in my savings account to pay off my mastercard but wanted to know if I should lower my military store credit card first?(Both have 6% interest due to me being in the military and forward deployed)

What kind of rate would I be seeing when I purchase a house. 

Thank you all in advance!

[marty56]

Pay down your CC balances.  They are too high (33%, >50%).  Try to get them bellow 10% of your CLs.  It is the quickest way to boost your score.

Also take note of the mortgage rate score buckets.  If you can pay down the balances to <10% at least try to get into the next mortgage rate score bucket.

Use the score simulator to estimate what your score would be.

In woking with FICO socrs, you ignore interest rates on your crads.  It is % util that is important al;ong with payment history,

My quess is to pay the store card off first since it has the higher util.  I am not sure how that card is cored in FICO so others may chime in hear with more info.

Message Edited by marty56 on 03-23-2008 07:53 AM

[Anonymous]

Hi SSgtUSMC,

First... thank you for the sacrifice you (and your family) are making.  May your tour end soon with your and all of your soldiers' safe return. !

Second... I am *not* an expert (yet!), but I can share my own experience, that paying down credit cards was the biggest boost to my score in the shortest period of time.  It literally only took 30 days.

As far as which to pay down first... I've seen conflicting reports about whether FICO scoring takes into account TOTAL debt/limit ratio (ammount owed on all cards/total credit limit on all cards) - vs. individual card debt/limit ratio -  ammount owed on each card/credit limit on that card) -- Anyone with input on that?

I'd use the answer to above question to help guide you on *which* one to pay first.  If you'll have enough to get *both* below 30% before paying off one or the other, that may be the biggest 'quick fix' .

 Your car loan can be last, and may actually benefit you for having a good mix. 

Hope this helps, and my thoughts for a safe return!

Sovi

[Anonymous]

Since you plan on paying off all credit card debt before you return pay off the highest interest card first and go down the line.

In the short term it won't matter what your score does while you spend the time paying off your credit cards. In the end you will reap the benefit of dropping your util.

Yes, make paying off the truck your last item to keep the good mix.

I used to have a util of over 90% in 2005. I started at the highest interest rate card (27.99%) and went down the line to save every penny possible. I now keep my credit card util at 0%, have a car loan and my scores are all above 760.

Good Luck!

[haulingthescoreup]

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@Anonymous wrote:
Since you plan on paying off all credit card debt before you return pay off the highest interest card first and go down the line.

In the short term it won't matter what your score does while you spend the time paying off your credit cards. In the end you will reap the benefit of dropping your util.

Yes, make paying off the truck your last item to keep the good mix.

Good Luck!

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Agree! The rest of us tend to get obsessed with day-to-day score changes (I sure do!), but in your situation, this is the way to go. Pay $20 or so over the minimums on the other cards while you attack the highest interest card, to keep the other companies happy. Then once the big one is paid off, take the amount you were paying and add it to the minimum + $20 you were paying on the next card, and then down the line. This is called snowballing.

You can keep using your cards for things that you would have to buy anyway (don't know how that works in combat areas!), just so you pay that off in addition to whatever you were going to pay anyway.

Once you've got everything knocked down, allow one or two cards at a time to report a very minimal balance (and then pay them off.) Oddly, your scores will be better if you show some activity. There's no hurry on the truck, once you've paid 1/3 to 1/2 of the original amount of the loan.

I also want to thank you for what you're doing! And I hope you've joined USAA --they might not start you out with really high limits, but if you've been with them for a while, they're really generous.

[Anonymous]

SSgtUSMC,

HI. Your score is in the middle as of right now, not too bad. Having just off your Capital 1 card, your line of credit and the Credit Union Visa they should be posting soon and give you an increase in your score.

As others have posted, since you plan on paying everything off, just do it in order of highest interest rate/highest balance, but since they both have the same rate, pay the highest balance first because you are paying more on it in interest every month due to the balance.

After doing a little math, if you can pay off the MC in one shot do it. It is only costing $5 in interest for the whole month and 33% util on it. This way you only have the Military Store Card left which interest is $23 for the month and 59% util. You are paying them fast enough and on time so you really aren't getting hurt by which one you pay first, but it may make you feel better knowing that it is paid.

I am no expert, but I paid off 6 cards in 6 months and my goal is to be debt free.
I was at 60%+ util and now 21% and on the decline and I increased my score 59 points in a month.
(except for my house and car of course for now, but that is next)

As for getting a better rate when you get home, rates are on the the decline right now and hopefully stay low for sometime. If you have a larger down payment for a purchase that also helps with rates along with your VA loan, don't forget about that.

Be Safe!!