As I am trying to increase my credit score in hopes of soon obtaining a mortgage I was considering the fact that one of the things that will increase my score is reducing the balance on my credit cards. Right now they're pretty close to being maxed out and I was planning to pay them down to around 50 or 60%, but that would reduce the amount of money I have available for a down payment / closing costs. Also, from what I've read it would be better to get them down to closer to 30% utilization, but I'm not sure I can pull that off and leave enough money for closing costs, much less a down payment. I'm considering doing the following and I was hoping that someone had some advice for me. I currently have a personal loan that I have a perfect payment history on. It's down to about half of the amount I originally owed and I was thinking of calling the bank and asking them to refinance it in hopes of obtaining a better interest rate. It occured to me that I may want to also ask for more money to use to pay down my credit cards further. The interest rate on the personal loan would be lower than what I'm paying on the credit cards, plus, I'm assuming the personal loan wouldn't be factored in to the debt to credit limit ratio, and by using the proceeds to pay down my credit cards it would hopefully improve my score. What do you guys think? Am I missing something here? Would having a new account on my report likely cost more points than I'd gain by reducing my credit card debt? Thanks much, Brett
I may be wrong, but I believe a low revolving credit balance is better on your report than a high personal loan. CC balances around 20-30% and a personal loan can actually increase your score because it shows that lenders are not affraid to lend to you money. Someone correct me if I am mistaken, I am looking into doing this myself.
