Lil Smurfette Posted August 7, 2006 Report Share Posted August 7, 2006 DH and I are in the process of purchasing our 2nd home. We have a family of six with three teenage children and one toddler and are currently living in a 1600 sq ft 4 bdrm home. We are wanting to purchase a new 5 bedroom home, hoping to get into contract by September and move in the beginning of the year. Credit scores are currently 668, 638 and 628 due to utilization. We just did some much needed repairs to our existing home and charged most of the materials on our credit card, but have since gotten a HELOC from USAA, so we do have the money to pay them down. We have two car loans one that will be paid in about 18 months (both have 5% interest rates).Just a few months ago high CL was around 750, middle 693 and low 675. How much should we pay the credit cards down too, to bring our credit scores back up. And should we go ahead and either pay off the car loan or just pay it down to 10 months? -------------------- Link to comment Share on other sites More sharing options...
nevermore Posted August 7, 2006 Report Share Posted August 7, 2006 Utilization should be no more then 30%, 10-15% is better, and I believe, 3% is considered optimal for credit scores. The cars I'm not so sure about. Debt to income ratio is very important to home lenders though. Perhaps just pay one off and just pay the minimums on the 2nd.You may be able to get advise directly from one of the loan brokers if you post this in the mortgage forum. Best of luck to you. Link to comment Share on other sites More sharing options...
Ahntara Posted August 7, 2006 Report Share Posted August 7, 2006 New accounts (of all types) generally equal a deduction in credit scores. Scoring software looks at History. New accounts have no history. After 6 months, your score begins to get some Additions. The deductions drop off after 6 mos, 12, 18, 24, 36, etc.Utilization should be between 1 - 9% for maximum points. Scoring software evaluates both the overall ratios (on revolving accts.) and each individual account.HELOC's are revolving accounts. They usually factor in the score at 100% utilization. They can be handy to have, but HELOC's and inquiries become score-killers for the RE investor. You can't do anything about inquiries. But that section of the score is just 10%. HELOC's impact in the 30% category. With such a large segment of the scoring software working against you, it not unusual to see RE investors with scores in the low 600's even with perfect payment histories.I recommend keeping the auto loans and using any available cash to pay down ALL revolving accounts. You will have to make your own decision about the HELOC. Lower interest rates and less fees may make using this financial tool a wise decision for you. But you would benefit by planning for the long-term and letting all accounts "age". Link to comment Share on other sites More sharing options...
Lil Smurfette Posted August 9, 2006 Author Report Share Posted August 9, 2006 For your advice. Link to comment Share on other sites More sharing options...
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