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Credit to debt: I have a number of old revolving accounts that are paid off but still active (Best Buy, Ashley Furniture, etc.) Generally I’ve only opened these when there was 0% for 12/mos and I needed to make a purchase of several $k). The total credit on these is about 10k. I also have 3 other credit cards: a Costco Amex ($0 balance), a Discover Card ($0 balance), and a Master Card that I’m currently carrying a balance of about half the limit. I used this card to pay for a recent family vacation and the related expenses. I could pay it off but it would eat into my contingency/down payment fund so I’d rather pay a 10% of the balance per month on it until it is gone, unless doing so would harm my application. So that said, by my calculation I am using about 20% of my available credit not counting the store cards. Is this going to be a negative on my app? If so I can pay it off or down prior to application, but again I’d prefer not to unless absolutely needed.
What are the current guidelines on debt to income ratios for housing and total debt, and are these based on gross income or net? I put a decent chunk into my 401k and some savings plans but can scale these back if my numbers approach any limits. According to Discover, my FICO is 803 so I don’t think anything above ought to put me in jeopardy, but before I even start the process I’d like to be away of anything that might be an issue and clean it up as much as possible
A lot of what creates your credit score is what you're allowed to borrow verse what you are borrowing, so it's good to have those cards opened with $0 balances. However, store cards are weighted differently than basic Visa and Master Card type accounts. They don't really care that you're allowed to borrow at Best Buy, just that you have no late pays with them.
Also, it's a good rule of thumb to have less than 40% borrowed on any one card. If you're at 50% like you said above, you really should get that down. You're deemed a higher risk when they see larger amounts of debt on one card. If you've had that debt on there for a few months, and then you all of a sudden pay it off, they also see that as a risk as they don't know if you'll go and charge up your cards quickly again.
Best is to get that down below 40% and then slowly pay it off as a revolving credit as it's only the minimum payment that would count against your ratios.
At a 803 FICO, there is nothing to clean up. If you wanted to know how paying off your balance would affect your FICO, why don't you look at an out Discover Card statement before you had the larger balance on your credit cards.
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