Which will do the most for my FICO score?

[Anonymous]

Working on getting my FICOs to the highest level possible with hopes of buying a house in the next year. Scores currently drift slightly above and slightly below 700. They will go up some in the next few months as some inquires scroll by the one year mark, my youngest tradeline has a one year b-day,

and my average age pushes over 6 years.

I have some money to pay off some debt. I have only two things to pay off. No other debt at all accept student loans. They don't report at all so for purposes of this exercise, I will leave them alone.

1.) $8100 LOC with B of A which reports as revolving credit at 5% interest which is currently about 18% of my total utilization and about 80% of it's individual trade line utilization. I have no other revolving trade lines carrying a balance but I can make sure one stays <3% for purpose of showing any utilization at all.

2.) $13,500 payoff on car loan which is my only installment tradeline. Interest is 4.99% Been paying on it for 2.5 years if that matters.

The only thing that has me concerned is that when I go apply for a mortgage, having the carloan (vs the B of A loan) to figure into my dti ratio will be pushing it to stay within the 43% mark.

But paying off the LOC gives me more cash for downpayment/reserves, etc.

[MidnightVoice]

In terms of FICO - revolving % is much more important than Installment %

In terms of money - the highest APR should be paid off first

In terms of your mortgage, I don't know, but debt is debt to your DTI I think

[Anonymous]

Teacher - Midnight Voice is correct, as usual.   All else being equal, lowering revolving UTIL is raises scores much faster than doing so with installment UTIL.  Please answer these questions:

1) What is the monthly payment on the LOC?  My guess is about $40 a month or so ($8100 x 5% interest divided by 12 months).  By paying this down, to say $3k,  you will knock the UTIL on this TL to below 30% and overall UTL to below 10%.  Both will bump your score up and your payments will fall to about $12 a month.

2) Unless you have enough cash to pay down the car loan from $13.5 to, say $1k (to keep the TL open), I'd leave it alone.   SInce it is an installment, the monthly payments do not change without refinancing the whole thing - which you don't want to do (would be a new TL and hard to beat 4.99% you have now).

3) Remember to keep enough cash for the mtg downpayment and all the things you will need after you close on the house (insurance, furniture, appliances, paint, etc. etc., and of course any "surprises" like a leaky toilet, electrical issue, etc.).

Finally, how do you know you are so close to 43% DTI?  If you get your score up enough, your interest rate will drop.   And you can always shoot for a slightly lower priced house or take a harder line on negatioting the price you will pay.

[Anonymous]

Paying down the LOC will do the most for your FICO score. The car loan is not really hurting.

[Anonymous]

Teacher - Midnight Voice is correct, as usual.   All else being equal, lowering revolving UTIL is raises scores much faster than doing so with installment UTIL.  Please answer these questions:

1) What is the monthly payment on the LOC?  My guess is about $40 a month or so ($8100 x 5% interest divided by 12 months).  By paying this down, to say $3k,  you will knock the UTIL on this TL to below 30% and overall UTL to below 10%.  Both will bump your score up and your payments will fall to about $12 a month.

about that, you are right, if I am going to pay it, I am going to just pay it all off, i can use my regular CC to keep a small running balance, for uti purposes,  it is easier for me anyway

2) Unless you have enough cash to pay down the car loan from $13.5 to, say $1k (to keep the TL open), I'd leave it alone.   SInce it is an installment, the monthly payments do not change without refinancing the whole thing - which you don't want to do (would be a new TL and hard to beat 4.99% you have now).

no,  I don't have moeny to pay above and pay on this really and like you said, I want to put some money aside, paying above and leaving car alone gives me 5,000 in the bank

3) Remember to keep enough cash for the mtg downpayment and all the things you will need after you close on the house (insurance, furniture, appliances, paint, etc. etc., and of course any "surprises" like a leaky toilet, electrical issue, etc.).

by paying #1, leaving #2 alone and paying regularly, I have about 18,000+, customary for sellars to pay closing around here and so I need 3-5% of about 180,000 for fha which is no more than 4,500 plus reserves which fha does not require but it makes me look good to a LO

Finally, how do you know you are so close to 43% DTI?  If you get your score up enough, your interest rate will drop.   And you can always shoot for a slightly lower priced house or take a harder line on negatioting the price you will pay.

I estimate mid 700 by the time I apply and you are right, I didn't think about the interest rate dropping, giving me some wiggle room plus the extra money in reserves will help

[Anonymous]

Great, teacher.   Looks like you have a solid game plan.  Let us know how it goes, especially what your scores end up being after you pay down/off the LOC.

And a good idea about allowing 1 cc to report a small balance.  1% UTIL appears to be better than 0%, as it shows recent use of revolving credit which FICO likes.

At this point, you probably can't do much about your income level.  But you can do alot about your credit utilization and credit score, which could make the difference.

Good luck and keep us posted.