mike1232123

help bumping up my fico score

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     hello, im new here because i want to be in a position to obtain a mortgage in a few months.

 

     i have one account in collections (for which i have a thread on here asking about pfd)

besides that, my credit (for the last 7 years or so) is prettry good.

     i have four credit cards, only one of which i was ever late on and one loan i took out almost a month ago for about $1200. my credit cards total bal/max is about $1100/$1400. I read different things about what you're supposed to do with credit cards a couple months before you plan to apply for a mortgage. some say pay them all off completely. others say get them all down to around 25%. others still say pay some off completely, but still carry a light balance on the others. I know having them all near max as they are now is no good, i just got a half-way decent job so im going to fix that, i just dont know if im better off actually leaving some balance on them, also i have a "buy it now" account, a revolving credit line advertised by ebay, ($300/$500), is this in the same boat as the credit cards?

     also this loan i took out, its setup for 10 monthly payments of about $140. should i pay off a little more than that? or should i try to get it completely paid off before i even think about applying for a mortgage?

     my fico is currently at a 641, i guess not too bad since i got my cards near maxed. unfortunately I dont think that score is recent enough to reflect that loan i took out. (i get one around the 15th of every month) I'm not even sure if this loan is even reported. its from a company called tower loans, they sent me a "pre-approved" slip in the mail, but unlike most "pre-approved" offers, it really was. I called before i went there and asked "no credit check"-->"nope"  "no income verification?"--> "nope" and since i didnt have enough to pay my rent which was due about a week afterwards, i gladly accepted it. I'll have to ask when i go to pay on it, whether or not it is reported to the credit bureaus.

     anyway im just wondering whats the right thing to do with my credit cards and this installment loan before talking to a lender about a mortgage, and sorry to use a thread title thats probally been used about 100 times on here.

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The best thing to do with those credit cards it to get your utilization ratio to under 25%.  The higher the balance on your credit cards (i.e. just about maxed out) is a good ding to your score.  If you pay on those and get those balances down, you will see your score increase.

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You might want to google "Tower Loans".  For example http://www.ripoffreport.com/reports/search/tower%20loan

 

Your interest rate is what, 28%?

 

And, your FICO Mortgage Score will be higher if you pay off Tower and close two of your four CCs...and pay the two that remain open off completely.  (Because the FICO Mortgage Score will penalize "utilization" above 9%, people assume carrying 9% of available credit on your CCs is a good thing...its not).

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I agree, once you get your balances below 25% you should see an increase.  Paying them off would be even better.  I don't think you need to keep a balance on your cards if you can possibly help it.  

 

Also, dispute all of your negatives with the credit bureaus.  

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thank you, i will pay those cards down, and pay off that loan before i talk to a lender.

and the loan i got from tower does have a kinda high interest rate, something like 28apr like willigtocope said, but i needed the money so i took it.  its a relatively short-term, loan (10 months) theres people who (stupidly) repeatitively pay more interest than this for payday loans to borrow the money for a couple-few weeks. but sometimes in a jam, its good to have available. (ie, my situation, rent's due + i'm broke, or something like car's broke, i can either end up paying a few hundred in intrest on a loan to get a beater, or not get to work, or a lot of other scenarios) overall my 28% loan will cost me about 15% interest if paid on time and less if paid early. i think it beats getting evicted.

yes i googled tower loans many times before i took a loan from them. a lot of bad stories. all from people who didnt take the time to read what they signed, or didnt care to pay, just saw "GET CASH TODAY" and went nuts. i read everything before i signed anything (even though the people at the loan place seemed a little surprised about it) and while id like a lower rate, i accepted it. And I think it will be okay, i don't know for sure, but i doubt that they'll try and change their terms, or deny payments i make, or any kind of stuff like that.

 

obviously, in the ideal world, i wouldnt need to have gotten a loan, obviously, it would have been better to get a cheaper rate, but it is what it is, and no matter what people say, im glad tower sent me that offer, otherwise, i wouldnt have this house to sit in, the power to run this computer im using, etc.

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I'm sorry.  I didn't mean to sound critical.  I've been in situations where I've had no choice but to borrow when I shouldn't have.

 

As long as you know what you're getting into and have a realistic plan for getting out, you'll be okay.

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i have another question about this,

i can pay down my credit cards to a zero balance in a month or so, no problem

i have my phone/internet bill on autopay from one of my credit cards.

i have heard that having an automatic payment set-up is good for credit scores

so-

?#1- is it even true that having a bill automatically paid from a credit card helps your scores?

and if so-

?#2- if it does help, at the time I would apply for a mortgage, would i be better off leaving this bill on autopay, or cancelling the autopay to ensure that all my cards have a zero balance?

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As far as I know, the only thing autopay does is play into the "utilization" scam in the sucker score.  It DOES NOT have a positive effect on your FICO Mortgage Score...but...as long as you pay the CC balance in full each month, it doesn't hurt either.

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@mike1232123 - they probably tout the automatic bill pay as helping your score to get you to sign up for it.  It does, however, keep you from paying late - which in a round about way, helps your score by not lowering it with a late payment.  LOL

@lionhunter - Good point.  

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missing a payment on a cable/telephone bill is not exactly bad thing as long as you can pay it off even after the due date. if for any reasons, there r insufficient funds in bank account, a non-sufficeint fund fee + late fee with cable might add up significantly.  its always advisable to delete autopay for that exact reason. it has minimal effect on credit scores until almost you are behind 50+ days at which point they might think of reporting you for 30 days late.

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