Home Loan

[creditcardfree]

Since you already have $1500 in savings, I'd put the full amount on the debt.

Pay off card 2 and 3.
Pay off card 4 using remaining tax refund and $900 of your $1K you have for this month.
Pay $100 towards card 1 (this is out of your regular $1k pmt).

By the end of February you are only $4400 in debt on one card and can continue to pay $1000 for the next 4 1/2 months.

You are then left to add to your emergency fund and house funds.

[Elgin526]

Also, if you are getting a tax refund of $5600, you may have to much being withheld from your paycheck. You can do a worksheet on the back of the W4 form to figure out how many exemptions to claim. This will increase your paychecks and give you a smaller refund next year (or you could owe a little, it just depends). This will give you more money right now to put towards debt and saving, rather than waiting until next year for a big refund.

[vsjhoc]

Originally Posted by PAZach

Would like to hear the expert opnion.

If you've been lurking here a while, you're probably aware that we "experts" have different opinions. Some of us are debt-adverse and want to pay off debt ASAP, others think the EF is the first priority, and the rest like the Goldilocks approach. There is no single correct answer.

My $.02 is to wait a year on the house while you're doing whatever you decide to do. You want to get that credit score as high as you can to get a mortgage at the lowest interest rate possible, and that takes time. Even if you paid all your debt tomorrow, your score may not jump significantly right away. Good luck!

[anonymous_saver]

I would pay off the credit card #2 first. But then I would pay the others off depending on the interest rate that you would be charged with (if you ended up not being able to pay these all off in one year). That is if card #1 is going to be at 25% interest if you held a balance on it in one year, and if card #3 will be at 10%, and card #4 would be at 17%, then I would pay the remaining cards off at card #1, card #4, and finally card #3. This way if anything happens in the upcoming year and you don't pay all of these off, you would be able to only have the card(s) with the lowest interest rate with a balance on it.

[anonymous_saver]

Also, I would highly suggest that you have at least 3 months of an emergency fund, money for closing costs and at the very least 5% of a downpayment before you even think of getting a home. With paying off this debt, that might take 2 years, but it would really be the safest way to do things. I would also suggest cutting down on your costs for at least a years worth of time. Get rid of cable, internet, land line telephone, newspapers, magazines, eat out less, get a cheaper/smaller apartment instead of renting a house. You may be suprised how fast this can help you out. Even if you were able to save an extra $300 a month, you could be on your way to achieving all of these goals a lot faster!

Are you saving at least up to your companies match in retirement by the way? I would also at the very minimum do that.

[Hot dog]

Am I the only one who would not pay the cc back until they are ready to start charging interest. I say put that money into a mm or savings and you earn the interest on it then pay it off right before they start charging you interest.

[disneysteve]

Originally Posted by Hot dog

Am I the only one who would not pay the cc back until they are ready to start charging interest. I say put that money into a mm or savings and you earn the interest on it then pay it off right before they start charging you interest.

I would agree as long as the person has both the money and the discipline to pay the bills in full before the 0% expires.

[sweeps]

Originally Posted by Hot dog

Am I the only one who would not pay the cc back until they are ready to start charging interest. I say put that money into a mm or savings and you earn the interest on it then pay it off right before they start charging you interest.

I agree with you. (I assume you mean just pay the minimum on the card until the month before the 0% expires.) But I think OP is trying to clear his balance sheet because he wants to buy a house.

[PAZach]

Are you saving at least up to your companies match in retirement by the way? I would also at the very minimum do that.[/quote]

Not only am I saving approx. $400 per month in savings I also am contributing 4% of my paycheck to a 401K with a 4% company match.

[PAZach]

Originally Posted by sweeps

I agree with you. (I assume you mean just pay the minimum on the card until the month before the 0% expires.) But I think OP is trying to clear his balance sheet because he wants to buy a house.

I could certainly put away my tax return however I want to maximize my credit score by paying down debt. CC #1 has approx 90% usage on it which I'm assuming is keeping my score down. It is at 0% APR but from what I understand when you get that close to maxing out a CC it drives your score down. Correct me if I'm wrong.

Let me know what you think but I was considering paying $2K with my tax return to CC #1 to give me a little breathing room and hopefully bring up my score a little.

CC #2 will be paid off this month with my normal monthly paycheck. So that mean I have $3600 left out of my tax return. Should this money go to EF or add additional $ to other cards and be debt free faster. Thanks for all your help.

[PAZach]

New update found out I'm getting and additional $718 from the state in taxes. So in total I'm getting $6400 back this year.

[sweeps]

Your debt ratio is very high right now, so yes, paying down your cards should improve your score. However, as others have noted, your credit score is not your primary concern here. You aren't just going to need a chunk of money for the down payment, but there are a lot of incidentals that come up when you buy a house -- earnest money, closing costs, moving costs, paint supplies, etc. If it were me, I would stash the money for a while in savings and see how much you can accumulate.

[humandraydel]

I'd also like to point out that your credit score isn't going to just jump magically once you pay down debt. With a score of 640 I'd say it'll take 2 years before you can bring it up to the magic number of 680-700 which is required to get the lowest interest rate. You could probably buy before then, but you're going to pay for it with a higher interest rate, especially if you don't have 20% down.

[creditcardfree]

Originally Posted by PAZach

Should this money go to EF or add additional $ to other cards and be debt free faster. Thanks for all your help.

Just personal opinion here. I would pay towards the cards regardless of interest rate with your additional tax return money. The quicker you pay those off, the quicker your credit score can begin to rise. While you are waiting for it to rise, stash any extra cash towards an EF and down payment.