Profile picture for mlee1013

better rates/credit score question

I am about to put my James Island (29412) SC home on the market. After it sells, and prior to buying a new home, I will pay off all my outstanding debt. I understand this will increase my credit score which is now around 660. I also understand I will be able to obtain better rates with a better credit score. My question is: Do you know how long after I pay off my debts will it take to increase my credit score? The only reason it is low is because of debt to income ratio..no late payments or other derogatory issues.
Thank you,
melissa
  • September 03 2012 - Charleston
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Answers (9)

I would keep some revolving credit but not too much so your debt to income stays low. If you pay it all off you will not have a credit history that actually helps your credit. It is excessive credit that has a negative effect, no credit also has a negative effect.

Any revolving credit should be kept under 50%. If you look at the oldest and best revolving credit and keep that active you should be in good shape.

My experience has been that it takes more like 90 days to see a significant improvement in credit scores.

If you're ready to list, I'd like to talk. Best...
  • October 12 2012
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  • September 07 2012
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Profile picture for Open Home Mortgage
Your score will increase as soon as your creditors report to the credit bureaus.  Paying off your credit cards or other revolving accounts will have the largest affect.  Depending on how many are over 50% utilized, your score could increase quite a bit within 30 days.
  • September 04 2012
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Profile picture for Mikki Ramey
Seaside Plantation is a lovely neighborhood.  It has a great mix of "starter homes" and high-end homes.  I would be happy to talk about the value of your home.  Have you listed it yet?  I am happy to list it for you or give you a second opinion if it has already been listed.  Please let me know if you would like further assistance.  Thank you!
  • September 03 2012
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This would be good time to get pre approved for the new loan. Several things would happen....... you won't sell one house until you know you qualify for a new mortgage, lender can run a What If scenario and tell you up front likely increase in credit scores if you pay off current credit card debt (installment/mortgage debt does not count), and do a Rapid Rescore after debt is paid off to obtain new credit scores. They could also evaluate paying off debt vs increasing down payment option.
Your 660 credit score would only impact rates significantly on 30 or 20 yr fixed conventional programs and 15 yr (Mortgage Ins cost) with less than 20% down payment.
  • September 03 2012
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Profile picture for mlee1013
My home is in Seaside Plantation off of Successionville Rd.
Thank you for the replies and the information.
Please let me know if you want any details regarding the home for MUSC buyers or others.
Melissa
  • September 03 2012
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Profile picture for mlee1013
My home is in Seaside Plantation off of Successionville Rd.
Thank you for the replies and the information.
Please let me know if you want any details regarding the home for MUSC buyers or others.
Melissa
  • September 03 2012
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Profile picture for Mikki Ramey
It usually takes several months to see an effect.  I have several lenders in the Charleston area who also work with lower credit scores.  Let me know if you need some names.  Also, if you haven't listed your home, I would be glad to help.  I work with many buyers that work at MUSC who want to buy in the James Island area.   What neighborhood are you in?
  • September 03 2012
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Profile picture for Cindy Quinton
I don't know if you can expect a big jump, more of a steady climb of 5 to 10 points a month is my guess. My guess is it is more due to your debt utilization ratios than debt to income ratios as that isn't a factor in scoring (but a huge factor in lending). 

Everyone is going to say pay all cards down to a 30 to 50% utilization, but after watching our credit carefully for the last year, pay them down under 10% but don't close them if you can, specifically revolving debt. 

I am always able to get very specific, well informed answers at the forums on www.myfico.com. Good luck with your sale and purchase.
  • September 03 2012
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