- July 6, 2008 at 7:04 pm #259489
Here’s some advice that was just given to me, and I wanted to pass it
on to all of you.
My husband and I are looking to lower our mortgage interest rate …
not refinance, just see if we can drop the interest rate. We
refinanced almost three years ago, mostly to get out of a mortgage
that had a variable interest rate. Our credit was not the greatest, so
we got a fixed rate of 7.65%. There was a three-year prepayment
penalty which will now be up in September. Meanwhile we worked on
paying off some of the debt (and did a pretty good job) hoping to be
able to drop that rate once the prepayment penalty time was up.
So the guy we’ve worked with (this will be the third time now, and I
really consider him a friend at this point even though he’s several
hundred miles away!) called to say he’s going to see how things look
now and where we stand. Our credit score has gone from fair/poor to
good, but not great. He said a big thing is we have a couple cards
that have some charges on them (hubby has been working on several home
projects). The problem he said is that three of the cards are close
to the credit limit. A big factor that the lenders look at these days
to determine your credit score is the use of the card. It will not
kill you to have some charges on it, but it needs to be less than 50%
of the total credit limit. So if you have a card with a $2000 limit,
they want to see a balance of no more than maybe $950. And it’s okay
to have more than one card with a balance (though the fewer the better
of course), but again, they can’t have a balance of more than 50% the
credit limit. So he had even said you can “play” a little — if you
cannot pay it down or off, you can transfer some of the balance to
another card and spread it out a little, as long as none of the cards
go over 50%. Actually, somewhere else I heard the magic number is 41%
so I’m actually going for that one to play it safe.
Anyway, I will let you know how it all turns out for us, but meanwhile
I have gotten all remaining balances down to 40% or less. From what
he said, this will help us get a better credit score and thus a better
interest rate. So that is something to keep in mind … if you’re
going for a loan or refinancing or whatever, and you want to get the
best credit score you can, make sure you have no more that a 40%
balance on any cards you have. If need be, move it around a little to
make it so.
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