Just because I know there are plenty of smart people on here that will have a grasp on this stuff. Currently make $110,000 a year. Purchased home last year through FHA loan but we are looking to raise credit over next 6ish months and refinance onto a better rate and to get rid of some of the FHA fees. Didn't get to work on restoring credit the last year as much as I wanted but am trying to set a course. Have about 12K right now in 5 different credit cards, a personal loan and a financed zero gravity mower all together. I can attack the next couple months a few different ways but please let me know your thoughts.. 1. Will consolidating the 12K into 1 monthly payment via consolidation loan benefit my credit score? After buying my house, my credit returned to crap (600ish) The interest of the consolidation loan is higher than most of my CCs/loan/financed mower but I am wondering if the consolidation will aid the credit score? I kind of want to have it be just one payment a month but that is more just for convenience. More so want to elevate the score. 2. Should I just wait for my tax return (15K or so) and just pay everything off. That seems obvious but I was hoping to most of that aside to use when I go to refinance? 3. Even with my crappy credit, I do have about 30K equity in my home after just one year of owning. Is an equity loan with low credit even feasible. Home value is $285,000 Thanks in advance... BigBUM
It's all about interest. That would be the only reason I'd get a consolidation loan. If the CC interest isn't killing you then I'd just wait to pay it all off in what, less than 3 months with your tax return? PS: The fact that you're getting back $15K in you return is a problem. You're loaning the Gov money for free. Adjust your withholding.
What's the interest on home loan currently and interest on the consolidation loan (if you do it)? Also... For short term.. one option is to borrow against 401k (to consolidate everything), these usually have super low rates and can be paid off early w/ no penalty other than interest/potential earnings lost. Not sure if you have 401k built up , but if you do it... I think it looks better since credit scores won't see the loan (typically), raising your available credit and not screwing with equity you're building etc. Then you put all the cards away, build savings and use one card for gas/purchases that you pay off monthly for credit reporting etc.
Yeah, adjust withholding for sure.. It's best to get nothing back, especially if you know how to save etc. I'm wondering if he forgot to change credits if he closed on fha loan early this year. Also, I think you're right on just settling it up fast via return (since it'll be there), unless the credit cards have horrible rates... Sooner is better
Why wait at all? Start today and pay off the CCs and loans in reverse interest rate order. That $30k in Equity is 'Dead'. It's not doing a damn thing for you. Save of your cash, start buying investment real estate. The home equity can be used to show liquidity for the real estate loans with a HELOC (Home Equity Line Of Credit) loan from Chase. With HELOC loans, you don't actually pay anything unless you use them- you're just showing lenders that you're liquid. Is it just you making 110k or is that you and your spouse together? Honestly, with that kind of income you could retire in 10 years. Stop buying anti-gravity toys. Your money and stuff should work for you, not the other way around.
I can answer question 1 for you. Yes, your credit score will improve if your consolidation loan is a fixed term payback. The reason is that the credit calculation does not consider the debt as revolving anymore. Within a month of us doing it credit score jumped by almost 30 points. As always, your mileage may vary.
Percentage of available credit used is a big factor. So ideally you'd pay the cards off, leave them open and not really use them except for minor purchases to keep them active. Depending, you may not have the self control for this. You'll have to be the judge of that.
So if you setup a HELOC but don't use it, it would actually show better for buying future investment properties? I hadn't even thought about that ... Interesting point.
