zarfkitty

Utilization Question (& a lurker's introduction)

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Hi Y'all... I'm Shannon from Texas. I've lurked on this wonderful forum for several months. I've gotten a baddie or two deleted, bought an insanely overpriced home (location, location, location!!!) and brought my FAKOs from straddling the upper 500s to the lower 600s to TU 707; EX 639; EQ 619. Good *b* on the TU. Yay.

All baddies of consequence are correct lates and getting older (youngest is 11 months), so I'm happy with that. I don't want those TLs deleted because other than the old-ish lates they are positive TLs. TC says high balances on CCs are my main credit issue. I don't have the lecture about lates anymore when I check my scores. Yay again.

I got the Christmas present of a LIFETIME tonight... BOA (joining forces with Sallie Mae) approved me for a 32k personal loan to consolidate my credit cards at a decent interest rate (much lower than my most expensive card). They paid off two of the cards for me and are depositing the remainder in my checking account.

I can pay off all but $500 of my balances with this money. I care about how any of this affects my FICO score because I want to refinance the insanely overpriced house soon. Love the house, hate the mortgage. (PMI sucks donkey butt!!!)

So do I pay all but a little on each card? Or is utilization even going to affect my score if I still have a couple lates in the 24 month window?

Also, any predictions on what a large installment loan will do to my scores?

Thanks to everyone for this forum and thanks in advance for my question.

-Shannon

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Is the BOA loan revolving credit or an installment loan? You mention installment loan. If that's the case, they you are probably going to see a nice increase in your scores. If it's an installment loan, then you would very likely do best by paying off the cards as much as possible. You might be able to get your revolving credit utilization rate down below 10%. That almost always helps.

Recent lates (11 months is still recent) decrease the bump you get from utilization improvements, but the bump will still happen.

Congrats on the improvements!

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Now that you mention it, I'm not really sure whether it will be revolving or installment.

I was quoted a monthly payment for a fixed amount of months. But it's called a "line of credit." I can re-use my line of credit as I pay it off, but then BOA would recalculate my payment term and payment. (I DON'T plan on doing this, however.)

So I guess I have to wait until it hits my CR to see which kind of account it is.

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Line of credit = Revolving account.

Your score will see an increase when your oldest late pay is 13 mos (in the past). So, waiting 2 more mos. will help. Limit inquiries as much as you can also.

"...is utilization even going to affect my score if I still have a couple lates in the 24 month window..."

Late pays hit your score in the History category, which accounts for (up to) 35% of the total.

Utilization hits in the next category *wonders what to call it*, which accounts for (up to) 30%.

So yea, paying down your CC's will yield a nice increase in points even if you have other, recent, derogs. It's also the one area of credit scoring in which you have TOTAL control. Remember not to pay off your cards completely. Use them monthly, keeping the balance between 1%-9% and be sure to pay on time. You may also want to keep a smalling rolling balance until your new, lower rate, mortgage closes. Lenders like to see those balances.

Your score will take a hit for the new account. I'd estimate that increases from utilization will more than make up for it (although no one can say for sure). New accounts cause deductions for at least 6 mos. You have to weigh the negatives against your overall goals. Getting out from under PMI is definitely worth it. I wish you luck!

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:mrgreen: Well it looks like the net impact will be positive, looking forward.

I anticipate a short term drop in scores though... BOA pulled EX when I first applied, then they pulled TU today. The EX pull has already hit my score but I might not be in the TU 700 club anymore. We'll see. They haven't pulled EQ yet.

In any event, my DTI will be better which is good for the mortgage refinance hunt.

-Shannon

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