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what to pay off... credit cards or cars

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hi there,

 

i have a unique situation... credit is rough (560) (i can get a loan at 580) due to old credit card bills.. they are past the sol but not the 7 year to get them off the report yet.. so here it is in a nut shell..

 

i currently have 3 homes..

1 lived in obviously and 2 rentals...

i plan on liquidating all 3 next summer.

 

current debt to income ratio is 63%(so the underwriter says.. but i think they are counting the old collection credit card accounts), i come up with 49% and i need to get it below 55% for another mortgage.

 

to raise my credit score and lower the debt income ratio, would i be better off paying off the credit cards ($12500).. these are the current excellent standing credit cards, or my 3 cars (total payment for the cars is $392 per month for all 3)

total owed on all 3 cars combined in $17000

should i contact a place like lexington law firm (and does credit repair really work?)

 

 

originally i was just going to pay cash for a home ($100k), but i can get a much better home for $150k... issue is that the mortgage lender minimum is 100k..

my plan would be this..

 

buy house for 150k

mortgage = 100k

at the sale of the 3 homes i have now, pay the mortgage off and still have about 180K in the bank when its all said and done..

 

 

 

thanks for listening or reading...

 

 

 

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I would pay off the cards first. Post your baddies here on the credit forum and the experts here will help you clean your reports. Whatever you do not use Lexington law or similar companies, they can do more harm than good. You can do it yourself for much cheaper. Good Luck

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the unpaid debts while out of SOL still matter for the UW of a mortgage. If they are old, why is your score so low? utilization seems to be a problem too.

 

If you work on utilization and derogs you can easily raise your score in short order.

 

or it sounds like you could wait and pay cash... I recommend that.

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I can't speak to the technicalities of SOL and the like.

 

I do like a strategy tho and I prefer to sneak up on things a bit when I can. I would sell one of the house and pay off my debt and a cash position and after a few months see how your credit recalculates. Selling three, buying a new one, moving et al is allot of moving parts in a short period of time, way beyond my comfort level.

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If the defaulted cards are that old, you may be able to dispute them and have them removed. Just to be on the safe side, post the info about the baddies, and tell us what state you're in so we know what suggestions to make so you can stay away from trouble.

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Another note, the move is from Vegas to Florida. It's getting very crowded here and we are in a hot real estate market. I don't want to move and play landlord across the country.

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Debt to income is all about payments - to lower it pay off whatever eliminates the most (payments) with what you plan to work with (cash)

 

That isnt necessarily the best way to get the scores up - I would give the needed info above - listen t the advice and try to make it work

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If the defaulted cards are that old, you may be able to dispute them and have them removed. Just to be on the safe side, post the info about the baddies, and tell us what state you're in so we know what suggestions to make so you can stay away from trouble.

what info should I post?

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Defaulted accounts, post them the way they appear on your report, just nothing that would identify you.

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my take on your old debts is that if they are over a certain amount most lenders may ask you to pay them off or maybe they will include them in your debt ratios, but if they are over 2 years old and arent more than $2-3,000 total they should not be including them in your monthly debt ratios...if they are underwriting to FNMA or FHLMC guidelines...some lenders are different. I am an underwriter for a bank for residential mortgage loans and if the charge offs are not too large or would not cause issues with our lien position we would not include them in your dti and would not require you to pay them off necessarily. It would all depend on your entire loan profile.

 

another item to consider is that if your payments = less than 10 months remaining they would not be required to be included in your dti...so if you have installment loans with less than 10 payments left it should not be included in your dti...maybe pay down some of that debt to free up some dti for yourself.

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To get your score up the quickest, pay off your CC debt first. Your cars are installment loans and basically don't affect your score much unless you default. for DTI, pay off what eliminates the most $payments$ per month.

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