Lower My Fico Score..?

Question

If I paid off my credit cards, which the total debt is about $5200 plus my $3000 student loan all within 6 months..would that raise my FICO score significantly? I have no late payments or anything in default, so it's not like my credit score is bad..but it's not GREAT either..it's about 686..After that, the only debt I will have left will be my $30,000 student loan.

I'm 22 and I'm just trying to lower it so I can look into getting a home with a great rate.

OOps..I do want to raise my credit score..not lower it.

Also, would reconsolidating the $30,000 help? Should I do that before or after I get the mortgage?

..I am working two jobs..please don't tell me to get a 3rd and my gross salary is $48,000 yearly.

Also, I know 686 is pretty good and I've been with my current employers for 2 years +..but with the lenders tightening their guidelines, I just want to go in with a good head on my shoulder.

Answer 1

Looks good. I'd advise you to try to keep your credit card balances low even close to $0 or a nice guideline is 20% of your credit limit. That will get you the best FICO Score. This revolving credit is more pertinent than your installment [student] loan. Repay that off last, last, last. 686 is not bad, but a 720 should be in reach.

Answer 2

Another way to raise the score is if you have credit cards that have high credit limits, but you carry little or no balance. If they are high interest cards, you should eliminate the cards that you have had the SHORTEST period of time.

You get penalized for the ratio of the amount you owe compared to the amount you COULD OWE. If that percentage is low, you FICO score takes a hit.

You eliminate the short term cards, because the ones you have had longer provide HISTORY, and if you cancel the older cards, that will ding your FICO score as well...

EDIT::: You only get to consolidate school loans ONE TIME, and thats it... Use that arrow from your quiver VERY wisely. Once you do it, you cant do it again...

There is a financial analyst on CNBC named Suze Orman. Google her site. It is a WEALTH of information for those wanting to straighten out their finances, and its a good resource in general.

Answer 3

Actually, 686 is a really solid score. Yes, paying them down (this is called "decreasing utilization") will help your score. I can't say how much, as there's no sure way to know that. Try creditboards.com - the forums are a really great resource to ask this kind of question and get answers from people with lots of experience, and people in the industry.

Answer 4

I'm thinking that the major credit card plus the "few store credit cards" that you carry represent potential debt that may affect your ability to pay on another major credit card and/or mortgage plus normal living expenses based upon your income. Even though you have zero balances on those cards, if you have 5 cards @ $2000 limits each, that represents $10,000 of potential debt that can appear on the books after you get a mortgage. I don't have any credit cards. I live with the theory that if I can't pay cash on the spot for day to day living expenses, I can't afford it. Banks and CC companies are betting on their customers' human nature of overspending and will eventually carry a balance and pay interest. If you insist on having one or two, get rid of the store credit cards. Closing those cards may ding your credit but for a short time. The long held CC will help you in the long run. Another thing is to build up a good savings account balance. If you start with zero savings and a couple of credit cards, you are on the negative side of the balance sheet. A savings account represents a positive asset for credit card purposes.

Answer 5

Unfortunately , that $30K is a huge stinger .
They figure your debt to available credit in computing your FICO so $30K is huge ( and not a mortgage that counts as living expenses )
Paying off the other $8200 will help , but I would suggest getting a 2nd job and putting it all to that $30K .

http://en.wikipedia.org/wiki/FICO_score

Good Luck !
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Answer 6

i thought the higher the score the better... Your question is confusing to me.

Answer 7

it will not rise over night but it will increase enough so you will not have any problem buying a house if your meet the other requirements!!!