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we are doing lease to purchase at this point and paying off all our credit cards

however to get optimal credit score it is advised to keep balances low, my question is what amount on a credit card is not cosidered a debt? we have 10 credit cards and charged 600$ on each to boost credit scores but that puts us tight with DTI if underwriter would count every monthly fee on a every credit card, please share your experiences, thank you by zulfia_569_857 from Midlothian, Virginia. Dec 17th 2012 Reply


William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,722 contributions

Having a zero balance on a CC will produce a lower score than CC's with balances on them.. You can try putting just $50 on each card.. or $1000 on just one or two of the cards.. But yes.. Having a balance will give you a HIGHER score.. Once your balances go above 25%, you will start to see your scores lower.. The lender will look at MINIMUM monthly payments, not your overall debt... so if you put $600 on each card, and the minimum payment on each card is $25 per month, then you would have a total of $250 per month added to your debt.. You can also try closing a few of the cards.. That in itself could potentially raise your score... but in any scenario, a 690 score allows you to get financing, both FHA and Conventional.. FHA will have nearly a zero impact to you by having a 740 vs. 690.. and with conventional, it would be minimal, so I'm not sure what your goal is, but if it's to get your lease purchase into a mortgage, you can apply now... I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Dec 17th 2012
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 1,823 contributions

If your score is now close to where you want it to be, now is the time to begin paying down the balances. Have I balance of between $25 and $50 on each card should be sufficient, and will probably get you more points than $600 on each of them. Keeping the balance small also keeps the payment small, and still gives you the score boost. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Licensed in California and Arizona ~ www.LoansA2z.com 888-889-9950

Dec 18th 2012
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Brett Boyke (bboyke)
#20 ranked lender in Illinois - 19 contributions

As long as it is still an active account, it is still considered a debt. If you pay off the balances, you will have a very minimal impact on your DTI. The other benefit will be a very low balance to available credit ratio, which is viewed as a positive from a FICO scoring standpoint.

Dec 17th 2012
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we have no problem paying off cc, the problem is not having balances on cc is lowering the score to 690, i did rapid rescoring and boosted to 740 by putting 600 on each cc, on the other hand it is a debt

Dec 17th 2012
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Raymond Denton (Raymond)
#11 ranked lender in Ohio - 224 contributions

I've never heard anything like that before. Your FICO score should increase once you've paid your debt down to zero. How are you doing the "rapid rescore?" Whose product are you using for that purpose? Is it from one of the 3 credit bureaus? Or is your Loan Officer running different scenarios for you with the software provided to them from their Credit Agency?

Dec 17th 2012
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Brett Boyke (bboyke)
#20 ranked lender in Illinois - 19 contributions

Now that makes sense - sounds like a real catch 22. Since you are only penalized for the minimum payments, I would think those would only be a few hundred dollars. If that little is putting you over allowable guidelines, it sounds like you may need to consumate the purchase with the lower credit score, and you may want to consider buying down the interest rate to compensate for the risk adjustments.

Dec 17th 2012
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Phil Dumouchel (PhilDu)
#32 ranked lender in South Carolina - 2,240 contributions

You definite do not need carry a balance on your credit card to improve your credit score, you just need to keep the cards active by using them regularly. My guess is that you had paid them all down and completely stopped using them for a while. All mortgage officers see customers with excellent credit and 0 balances on most if not all their credit cards. However, if your balance is over 30% of the limit ($600 on a card with a $2000 limit; $150 on a $500 limit) it will reduce your score (so 25% is a better target) and over 50% of the limit hurts it even more. Too many credit cards can also be a red flag, especially if they all carry balances or are new - think of it as concern you could go out and charge up $10-20K all at once if you wanted.Even if you just use the card to buy gas once a month then pay it off again when the billl comes in it shows activity and you are helping your credit profile by showing responsible use of credit. However, ANY balance on a credit card when you go to apply for a mortgage will affect your DTI based on the minimum payment on that card. Recommend you have them all (or as many as possible) the month prior to when you think you are ready to move forward with purchase, just keep them acitve until then. You might read my blog on this site, "First Steps". Also, there is good info at the FED RESERVE website: www.federalreserve.gov FYI _ I occasionally lend in VA when you are ready

Dec 18th 2012
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Joel Lobb (kentuckyloan)
#3 ranked lender in Kentucky - 192 contributions

I think you have too many cards. You need to payoff some cards and keep aroun d 4

Dec 18th 2012
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