Should we pay down our credit card debt or save money for a down payment?

Question

We had some unforeseen emergencies and had to use our credit cards. Should we pay these off first and then use the credit card availability for a down payment if needed, or save cash and keep the balances really high? Also, we have been working on improving our credit scores so we NEED to pay them down for that reason alone. Would lenders favor a higher credit score with less down payment? Or a lower credit score and more down payment?

Answer 1

Carrying a credit card debt is NEVER a good idea. Always pay them off. Your credit score is not based on how much you owe.

Answer 2

First of all if you can help ot NEVER use a credit card for the down payment. This is a tactic used only be experienced inverstors and even they only use it in a pinch.
The next thing is to make you payments on time and always pay even one dollar more than the minimum.
Saving for a down payment is goood. In some cases not needed. But it is a nice safety net.
As far as your score, make certain that your creditors are reporting correctly. Things like your credit limit being correct and not what the highest amount of money you owed (unless you went over your limit). This will look favorible.
To answer your last question, YES.
Higher scores can give you the abilty to get no money down financing easier. Particularly of you have great rental/mortgage history.
More down and a rocky credit history can be a factor unless you have a foreclosure or bad rent/mortgage history.
The rule of thumb in the credit realm is to keep your credit balance below or at 40% of your credit limit.
Give me a call

Answer 3

Pay down your credit cards because the interest on those is very high and you may end up paying for your unforeseen emergencies again and again if you don't pay them off quickly. Also when you apply for a mortgage loan if you have a lot of outstanding debt it will lower your credit score and could even effect your ability to get a loan in the first place (although it is a buyers market...so it might not have as big of effect as it normally would.) The easiest thing to do is pay off the one w/the smallest balance first then apply the extra you aren't paying on that one to the others, and continue to do that until they are all paid off. Good Luck...

Answer 4

A general rule is to always pay the highest interest rate payment (on whatever debt you have) first. So if you have credit cards at 18% and a mortgage at 6%, it's better to pay the credit cards. Even if the mortgage was 7-8%, it would still be 10% lower than your credit cards!

Answer 5

A down payment on a house, I am assuming?
Pay off your credit cards. Get 100% financing for the house instead. You interest rate will be much better with a higher credit score.

Answer 6

with a credit score of 580 or higher, you can get 100% financing, but you still need money to pay closing costs which can not be financed

paying down your credit card debt will impove your credit score and of course save you money by not paying so much interest.

you can't buy a house without paying closing costs even if your credit score was 850.....so I think you need to try and clean up the credit cards and try to save at the same time, if you going to buy a house in the near future. if you are not going to try to buy a house, forget the savings and get those cards paid off asap

Answer 7

A down payment won't really improve your interest rate or your monthly payment until it's about 5% or more of the sales price. I would suggest paying down your credit cards. Esp any accounts that are at 50% of the available limit or above. Because anytime you use half or more of your available limit, it dings your score pretty bad. You want all accounts (if possible) to be below that 50% cut-off.

Answer 8

Pay down your CCs. Save up 3-6 mths living expenses as an emergency fund while your credit score moves to above 720. Once you are above 720...get the loan. A 720 vs a 650 will end up saving ~$80,000 over a 30 year period on a $400,000 home.

Answer 9

Your FICO Score( credit score) is based on a few factors. Is as follows:
35% Payment History
30% Amount owed
15% length of credit history
10% Credit History
10% Types of credit

Kourtnie Donihoo
The E.D.A. Group

Answer 10

Pay down the C.Cs. That will give you more bargaining power at the lending table. A better credit score is the answer!