Which way do I go...

[vegas757]

Im preparing myself scorewise to apply for a mortgage soon. I have 12 credit accounts all pretty close to max. I have enough to pay off 10 of the smaller accounts which would leave me with the two larger ones near max. I 've heard about the 30% rule. In my situation, and based on balances only, would having 10 with zero balance and two near max destroy my score or hurt it only minimally? Playing with the numbers, I could also do this: have 5 paid off and 7 with balances lower than 30%. Which is the better route? Thanks in advance.

[Anonymous]

5 paid off and 7 below 30 is your best bet. You never want to have a maxed out card. 

[Trudy]

I agree with Saeren as high UTL hurts with all scores.  The less, the better.  But if the rest of your profile looks pretty good I would put off the app until you also reduce the number of CC reporting a balance to 2 or 3 because number of accounts with a balance is also a huge factor with MTG scores.  Plus you may need to build up some reserve before purchasing a home if the above are your only 2 options.  Depending on your MTG scores it could make a significant difference and you may find it's worth the wait considering the high loan balance and terms of MTGs.  That could save you several thousands in interest.  If you look at an amoritization schedule on a 30yr MTG it's amazing how much goes towards interest and your principal balance may barely move over years vs payments.  Interest rates can help with this but a shorter loan term seems to help the most.

You may need to buy now for your own reasons, but just wanted to provide a bit more information.

[SouthJamaica]

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@vegas757 wrote:

Im preparing myself scorewise to apply for a mortgage soon. I have 12 credit accounts all pretty close to max. I have enough to pay off 10 of the smaller accounts which would leave me with the two larger ones near max. I 've heard about the 30% rule. In my situation, and based on balances only, would having 10 with zero balance and two near max destroy my score or hurt it only minimally? Playing with the numbers, I could also do this: have 5 paid off and 7 with balances lower than 30%. Which is the better route? Thanks in advance.

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Having zeroed out revolving accounts is great, but having 2 near maxed out accounts hurts you badly.

[Anonymous]

Yeah you’re not gonna be prepared for a mortgage with 2 maxxed out cards or with 7 cards with a balance. Not if you want to get good rates and a good score in order to get it. As Trudy said, the mortgage scores require as many zeros as possible, preferably at all except for one. And utilization is a huge part of your score. Trudy makes some good points.

[vegas757]

Thank you to all. Just one other question...I've gotten my accounts with balances down to 5. I should be pretty good to go. I am also selling my current home for which I will make a very good amount on. Will the mortgage company take any consideration into me telling them the profit I make on the sale,  I will pay off the remaining 4 accounts, thus have no balances at all, when I go for my pre-approval?  I mean can I put this in writing during the pre-approval process?

[Anonymous]

Remember to leave a balance, a small balance on one. you want to do that before they pull your scores.

[dragontears]

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@vegas757 wrote:

Thank you to all. Just one other question...I've gotten my accounts with balances down to 5. I should be pretty good to go. I am also selling my current home for which I will make a very good amount on. Will the mortgage company take any consideration into me telling them the profit I make on the sale,  I will pay off the remaining 4 accounts, thus have no balances at all, when I go for my pre-approval?  I mean can I put this in writing during the pre-approval process?

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No, a lender will not give you a preapproval based upon scores you "will" get in the future. A lender can do a rapid rescore (at a cost to you) if your scores go up after preapproval. 

It is best to have your profile ready BEFORE applying as buying a house is already expensive without adding the cost of a rescore.

[CA4Closure]

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@vegas757 wrote:

Im preparing myself scorewise to apply for a mortgage soon. I have 12 credit accounts all pretty close to max. I have enough to pay off 10 of the smaller accounts which would leave me with the two larger ones near max. I 've heard about the 30% rule. In my situation, and based on balances only, would having 10 with zero balance and two near max destroy my score or hurt it only minimally? Playing with the numbers, I could also do this: have 5 paid off and 7 with balances lower than 30%. Which is the better route? Thanks in advance.

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In 2018, I took out a $600,000 home loan. I paid down all of my credit cards to less than 1%. According to my NFCU mortgage loan advisor, I had one of the best FICO scores that gave me the lowest APR rates at the time. I saved money for new furniture, a new wide screen LED TV and beds for four bedrooms. I then used my credit card to buy these AFTER I closed on my home. 

I would highly recommend you pay down your high balances and try to get below 20% before initiating a home loan. Trust me, your mortgage, insurance and other costs will prevent you from paying down your balances. 

Upon moving into my home, I took out the carpeting and installed wood flooring, redid the kitchen tiles and replaced the cabinetry and counter top and installed new appliances. This too set me back $15,000 in addition to the new furniture mentioned above.