Clearing off all Credit card debts (loan, annual fee, rate, financing)

[RK555]

Hi,

can anybody please tell me is clearing all credit card debts increases or decreases the credit score.

My score now is 680/708/720.

I am having a total debt of 15000$ in 3 credit cards.

If I can get a good mortgage rate for this credit score, then I will save for down payment without clearing my debts.

Please advice me.

Thanks in advance.

[chet everett]

What is your income? If you don't have any negatives on your credit report (slow pays, late pays, excessive non-CC debts) it would be a good bet that paying down those CCs would increase your scores. Also really likely to save you tons in interest payments too, both directly from the lack of high CC rates and indirectly through better terms on mortgage...

[renriq02]

if you want to raise your score you must do this

let's suppose these are your balances/limits on your 4 cards

Cap One - 800balance/1000 limit

Amex - 4000 balance/5000 limit

Bofa - 10,200 balance/ 18,000 limit

Gas Card - 90 balance/100 limit

I would pay the Gas card first
Not just because it's the lowest balance but because it's 90% of the limit which is considered a max out.

Then you have 2 cards at 80% of the limit.
Of course it would be better to pay off the Cap One first.

I would then wait to see how your score is impacted within 45-60days.

***this is to raise your credit score advice not to pay down high interest credit cards

[renriq02]

the other question is what kind of loan amount are you looking at and how much you can put down before/after paying your credit cards?

[Modification Specialist]

Originally Posted by renriq02

if you want to raise your score you must do this

let's suppose these are your balances/limits on your 4 cards

Cap One - 800balance/1000 limit

Amex - 4000 balance/5000 limit

Bofa - 10,200 balance/ 18,000 limit

Gas Card - 90 balance/100 limit

I would pay the Gas card first
Not just because it's the lowest balance but because it's 90% of the limit which is considered a max out.

Then you have 2 cards at 80% of the limit.
Of course it would be better to pay off the Cap One first.

I would then wait to see how your score is impacted within 45-60 days.

***this is to raise your credit score advice not to pay down high interest credit cards

I have many years experience in credit repair, I disagree on your numbers.

When a person is 50% of their credit limit, this counts against them. When they are 25% of their limit, this also counts against them, but not as much.

(Briefly) Your FICA score is tallied by five scores - on time payments, the proportion of the balances to credit limits, the length of time a person has had credit, number of inquiry's, and other (derogatory) information.

Credit reports cycle every 30 days between the 3rd and 9th if the month. If a person has derogatory information that is disputed. Depending on the day you do the dispute, the results will re-tabulated the following month or the month after.

Last year had a client who had a mid score of 568, in three days got his score up to 628, which qualified him for an FHA refinace.

My advice to renriq02 if you are concerned about your credit - keep your balances 50% below your credit limit. Making regular payments. On your installment debt, this is the type of debt you want to make more then the regular payment.

Sending extra into your principle - you will saving on the interest and cutting your term. After 4 to 6 months this get reported to the CB's as you being more responsible, and your credit score goes up.

My wife and I have sending extra into our payments, in Oct last time I checked my credit, my mid score was 796.

Here's something else to think about - you do not want to pay off everything and have no debt for a long period. What will happen if you have no activity on the credit report for a year, your FICA score will become NRC................

I worked with a mature couple trying to qualify loan for a loan. Because then paid everything off and didn't make any purchases. Their credit score was no existent.

It took another six months of reestablishing their credit before I could get them a loan.

Point - a person should plan for their future. Having a good credit score, you qualify for new financing at low rates. Insurance and utilities can be cheaper, plus you get less junk mail...............

Good luck on you endeavor...........

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[renriq02]

I have 10 years but who's counting.....

35% is the amount needed to be brought to with FICO
(not FICA...FICA is for taxes)

I was giving the OP an idea..and that's why I asked the loan amount/down payment.

We dont know how much money he has......

Also, making extra payments on an installment loan WILL NOT make your score higher. The fact that you make on time payments is the purpose.
Paying EXTRA will only lower your principal balance but not affect your credit score.

Paying EXTRA to your revolving credit should help your score if your balance/credit limit ratios are high.

I have had a credit card which I didn't use for 2years and it shows ON TIME PAYMENTS for 2years. Not all credit cards are the same.

Also, not all creditors report on the same date, and the credit agency don't update it as often as the creditors report.

Originally Posted by Modification Specialist

I have many years experience in credit repair, I disagree on your numbers.

When a person is 50% of their credit limit, this counts against them. When they are 25% of their limit, this also counts against them, but not as much.

(Briefly) Your FICA score is tallied by five scores - on time payments, the proportion of the balances to credit limits, the length of time a person has had credit, number of inquiry's, and other (derogatory) information.

Credit reports cycle every 30 days between the 3rd and 9th if the month. If a person has derogatory information that is disputed. Depending on the day you do the dispute, the results will re-tabulated the following month or the month after.

Last year had a client who had a mid score of 568, in three days got his score up to 628, which qualified him for an FHA refinace.

My advice to renriq02 if you are concerned about your credit - keep your balances 50% below your credit limit. Making regular payments. On your installment debt, this is the type of debt you want to make more then the regular payment.

Sending extra into your principle - you will saving on the interest and cutting your term. After 4 to 6 months this get reported to the CB's as you being more responsible, and your credit score goes up.

My wife and I have sending extra into our payments, in Oct last time I checked my credit, my mid score was 796.

Here's something else to think about - you do not want to pay off everything and have no debt for a long period. What will happen if you have no activity on the credit report for a year, your FICA score will become NRC................

I worked with a mature couple trying to qualify loan for a loan. Because then paid everything off and didn't make any purchases. Their credit score was no existent.

It took another six months of reestablishing their credit before I could get them a loan.

Point - a person should plan for their future. Having a good credit score, you qualify for new financing at low rates. Insurance and utilities can be cheaper, plus you get less junk mail...............

Good luck on you endeavor...........

..


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[eofelis]

[quote=Modification Specialist;6850693]

I worked with a mature couple trying to qualify loan for a loan. Because then paid everything off and didn't make any purchases. Their credit score was no existent.

It took another six months of reestablishing their credit before I could get them a loan.

[quote]

I recently checked my credit score for the first time, out of curiosity. It was low to mid 600s.

I have been debt free for 15+ years, I use my cc's a little and pay them off every month. Paid cash for a used car, etc.

What did that couple do to help their credit?

[SmartMoney]

ARRRGGGH

I lost a long post........quick version: renriq02 is on the right track in my opinion. All cases are different, he was zeroing in on your specifics and type of loan. I completely disagree with Modification Specialist on prepaying on installment loans. We have three different bureaus, with 3 variations on the formula, but I have yet to see an installment loan gain points for larger than the minimum payment.

You may not even need a new score......why fix something that ain't broke? Are you by any chance going FHA? If so, no worries, pay down/off after buying if you can qualify w/ the debt.

I urge caution, I have seen more unintended harm by trying to do good. Retiring all credit debt can harm your score, just as suddenly increasing your debt. Each month away from the activity (moving balances around), your score should stabilize, but it could take months. Eofelis' case is more common than most know.

And, finally, use caution when hiring credit repair specialists. Most don't realize anyone that charges to change the results of a report is in direct violation of the credit bureau contract they have signed. It's okay for the credit bureau to rescore, but they charge and the borrower is NOT ALLOWED to pay their invoice for rescoring. (Any rescoring I do is complimentary to the customer and done only rarely with a very specific request to bank management (ie, why: community service, multiple transactions dependent, existing bank client).

Eofelis, try to obtain what is called a secure credit card. Two of them if you can. A secured credit card is where you open a savings account w/ a bank. Whatever is on deposit is your security for the credit card. Say $500 into a savings account, that would be your credit balance. Use it every month, and pay it all off every month, except for $100-200. You should have scores in the high 6's low 7's within 6 months. The credit cards won't be cheap, most have a $35 annual fee. However, you will make that back w/ lower rates in no time.