My credit according to Wallethub (fwiw) is 668. I’m 57, divorced, and the guardian of a special needs 19-year-old. I finally got a decent paying job (75k) and I’m trying to fix up my home. Right now, I have about $1500k and I want to boost my credit score before applying for a home equity loan for repairs. I just paid $1000 off one credit card, thinking it would raise my score by 15-20 points (but that wasn’t the case). I heard getting a 700+ score could help with the home equity loan. A roofing company approved me for a loan with 12.5% interest, but I think a home equity loan would be cheaper. Here are my debts. What’s the best way to tackle this? Thanks in advance!
Best Buy (15 years old): owe $2195 with a limit of $6100 (24% interest)
Amazon (13 years old): owe $1639 with a limit of $1800 (26% interest)
Ally credit card (less than one year): owe $869 out of $1000 (17.5% interest)
Paypal credit card (two years old): $1495 out of $2700 (29% interest)
Secured credit card (4 years old): $153 out of $500 (22% interest)
Also, I have a car loan of $11k (9.97%) and a mortgage of $190k.
Farewell from Pondering Finances
Response from THE MONEY MINDER:
Hello There,
Congratulations on securing a new job and taking steps to address your financial situation. It’s understandable that you want to improve your credit score to secure a better interest rate for a home equity loan. As you rightly pointed out, reducing your credit card balances can positively impact your credit score. While paying down one credit card has its benefits, it’s important to tackle the remaining balances as well.
Given your current debt situation, it would be advisable to focus on paying off the credit card with the highest interest rate first, which in this case seems to be the Paypal credit card at 29%. Once that is paid off, you can move on to the next highest interest rate debt until all your credit cards are cleared. It might also be worth looking into transferring balances to a lower-interest rate credit card or consolidating your debts to make the repayment process more manageable.
In terms of the $1500 you currently have, consider allocating it towards paying off a portion of the highest interest rate credit card to make a more significant dent in that balance. Additionally, be mindful of your spending habits and try to avoid accumulating more debt while working on paying off your current balances.
As for the home equity loan, aiming for a credit score above 700 is definitely a prudent goal. By focusing on reducing your credit card debt and making consistent, on-time payments on your existing debts, you can steadily improve your credit score over time. Keep track of your progress, and don’t hesitate to seek advice from a financial advisor or credit counselor for personalized guidance on your situation.
Best of luck as you work towards improving your credit score and tackling your home repair needs. Remember that financial progress takes time and dedication, but with a strategic plan in place, you can achieve your goals. Farewell from THE MONEY MINDER.
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