Lower credit rebuild for better rates?

Question

My wife and I have been in real estate in the past, I was once a full time entrepreneur, keyword was. I've since been back to work a couple of years now and were 90ish% debt free now, nearly down to our mortgage and a HELOC. I've built out a plan with a family member who is in lending who is going to be able to help us refinance our home, lower our monthly payment from what we currently have and reopen a new HELOC to tap into more equity we've built with improvements (bought our house for a steal years ago).

Now my issue is with the credit. I have seen some HML's in my area that can come down to 660 credit but depending on where I look I am a few points under or right at the limit. I want to ensure that we will be able to get the ball rolling once our house refi is done. My credit used to be in the mid 700s but leaving my job dragged me into the 400s unfortunately.

Any advice on next steps here?

For better context as well, I have a small remainder of a student loan that should be done next month and then we will only owe the mortgage and HELOC.

Zachary Clevenger · Answer

Hmm. Few things I notice when having credit discussions with clients...

1) Try not have have max utilization of a charge card / credit card / etc. be over 30%. For instance if your credit limit is $1,000 do not have more than a $300 balance. That being said, try to pay your balance off in full every month.

2) Number of open accounts can hurt you, but can also help you if; 1) you maintain a zero balance, and 2) you have "time in credit" aka it's been open for a while (years).

3) Late student loan payments, exceeding 60 days are bad, exceeding 120 days are crap...

4) Outstanding balances, judgements, etc... try not to have those

But most importantly, you need TIME.

Justin Bartram · Answer

I believe that time may be my limiting factor here. I'm impatient and ready to jump back into things. I recently paid off a small amount on a 2k card, just started throwing chunks at a student loan, a lot of pay offs the past couple months, I think things may have just not shown up yet. I did take a small personal loan for an emergency a couple months back, I paid it off the next day in full (I got it to ensure that my funds clearing from my brokerage act wouldn't stop me from paying for the needs. That seemed to ding me about 30 points.