How do they expect me to live without my credit cards?

[shanendoah]

We have successfully sold our condo in Reno. I now have a pre-approval letter for a loan to buy a new house up here without selling our current one first.
Because we aren't selling our old house first (we intend to sell it, it just needs work that isn't reasonable to do while we're still living in it), our DTI is HIGH. That means that our credit reports really need to reflect that we don't have credit card debt. I use our credit cards ALL THE TIME. I pay them off each month, but I pay for everything on the cards. It makes budgeting so much easier, because I just make a couple big payments once a month instead of lots of little payments throughout the month. But that means that on our credit reports, it looks like we carry a balance (because it doesn't show that I've paid no interest in years, it shows that I have an average monthly balance of $1.5k, since that's our utilization).

So, our mortgage guy is suggesting we pay off the cards and then NOT USE THEM until the loan closes. Considering we haven't found a house we want yet (and don't want to move until mid-June or later anyway), that could be months!

How am I supposed to live without my credit cards for a couple of months!     (First world problem, I know.)

[TheHaitian]

We had to do the same and never went back... Been using our debit card only since Feb of 2014 :eek::eek:

It is possible I tell Ya

[Angel!]

I wouldn't stop using them, but make payments more often. If you pay them off weekly, then you'll never have too big of a balance showing on a report.

[shanendoah]

Angel! They will have to be used at least to some extent - we do a lot of shopping on Amazon, and I'm not putting my debit card info there. And the car is in the shop today, etc. But yeah, I'll have to pay attention to when they are used and pay them off right away.

TheHaitian we've done it before, too. I just really like the rewards we get on our cards. The CostCo AmEx pays for my CostCo membership and about one big CostCo trip per year. The Citi card points translate pretty directly to dollars that can be used on Amazon. And the Disney card we just got got us 10% off any purchase of $50 or more at the Disneyland shops, so definitely worth it. I will go back to using my cards after this.

[saveinla]

Can you ask for an increase in Credit limit?

[grumpyhermit]

Do they only report your statement ending balance? I know I should know this, but I honestly don't really pay attention.

If so can't you just plan to pay the cards a few days before the statement end date; that should minimize the actual balance reported to just those transactions that are pending.

While I could use my debit card, I have zero interest in doing so.

[Lizard Queen]

I think it does only show the statement ending balance.  DH likes to pay his CC's off soon after purchasing something.  Just pay them off 1-2X a week, say, every Sunday and Wednesday if you're shopping a lot.

[Deleted]

I think your mortgage guy is a little confused. You can have small amount of debt & then just provide them copies of $0 balance and bank account cash on hand at underwriting point.

You do need to know that when you fill out the Application & list debts - You put the minimum payment of $35 or whatever on the monthly payment line. DO NOT put the whole balance (as I did, because like you I pay off every month) - that threw them into a loop because they treated it like I had a $2K debt every month on top of normal expenses. That was a mess to sort out with underwriting. 

You do need to not be making large, unusual purchases on it going forward. 

I hate debit card because once stolen, they can empty your account fast & it can take a week to get the money back. Had this happen to two friends & I won't even get one of those debit cards with the Visa thing on it. 

[shanendoah]

saveinla - It has nothing to do with my available credit. I have ridiculous amounts of that, and never come close to using it. We have credit cards we haven't used in years. I honestly don't even know what my available credit (on cards) is, but wouldn't be surprised if we were close to 6 figures. The three I am actually using individually have limits between $11-15k.
This is about my debt to income ratio - so how many $ of debt payments we have each month as compared to my income. C doesn't have a job and they don't count the snowflake money from DSHS (even though it's guaranteed monthly for the next 7 years). Debt wise, we only have my undergrad student loan and the mortgage on the current house, but we're looking to add a second mortgage to that, at least for a few months (between buying and moving into new house and getting old house fixed up for sale and selling it), and they won't let us go over 50% debt payment to income ratio.

grumpyhermit - No, they report your current balance, average monthly balance, and your minimum payment. Because I use the cards for everything that's not an actual bill, my average monthly balance is pretty high, even if I do pay them off each month. And the last two months, we have had car repairs of $2k+ each month, so my average monthly balance looks even higher. So I need to get my "current balance" down to 0 and pretty much keep it there.

[Deleted]

I pay off most of my credit cards before the statement generates.  That actually hurts your credit score, too, because it looks as if you never use credit.  Sometimes I deliberately make myself wait so that I have a small balance.  But you shouldn't run into that problem in the short-term.

[saveinla]

Ah got it - I have nothing then and hate using debit cards. 

[milee]

Apr 28, 2015 12:06:01 GMT -5 grumpyhermit said:

Do they only report your statement ending balance?

No. And it's almost impossible to predict what date the balance will be reported as of.

Each creditor reports balances to the credit bureaus, but there are no set dates and even creditors that tend to report on certain dates can change those dates at will.

The balance reported is as of whatever date the creditor chooses to report. Statement ending balance is not something they report - it's just the balance as of whatever day of the month they give information to the creditor.

[shanendoah]

@rockit - confused or perhaps conservative, because we are pushing the $49.99% DTI here - we're actually looking at a 48.26% DTI with my student loan, current mortgage payment, and estimated new mortgage payment (at the top end of what we're approved for). So even just a little bit of credit card debt can push us over the edge into the >50% DTI and boom, funding falls through.


And yes, that DTI is scary high. But even at the top end of what we are planning, we will still have a full year's worth of our current mortgage payments in savings. We are planning on using the money to fix up the current house - repaint the interior, remove carpets and refinish original hardwoods, properly ventilate the bathroom fan, throw some more insulation in the attic - and then sell it.
Once we sell the current house, DTI will be down to under 33%, plus we'll have roughly another $60k to throw toward the new mortgage or make improvements to the new house.

[Deleted]

Apr 28, 2015 12:21:41 GMT -5 @southernsusana said:

I pay off most of my credit cards before the statement generates.  That actually hurts your credit score, too, because it looks as if you never use credit.  Sometimes I deliberately make myself wait so that I have a small balance.  But you shouldn't run into that problem in the short-term.

I don't think they pull based on statement date.  It seems like more of a random middle of the cycle check on all mine based on what shows up on credit karma. 

[grumpyhermit]

Good to know; makes me glad I'm not loan shopping.

I suppose I would just suck it up and go debit for the necessary term, but I would whine about it the whole time. With all the security breaches using my actual debit card would not thrill me, it feels a bit too exposed. Though the alternative of using cash is a no go; I can't keep track of cash at all and it just seems to evaporate from my wallet.

[shanendoah]

grumpyhermit - I am also not a cash person. Cash might as well be sand for how well I keep hold of it. I think it's because I am so used to budgeting with excel and paying attention to what is in the bank account, that once cash is pulled out, in my mind, it is already spent (because it is not in the account). So yeah, I'll use the debit card for groceries and shopping around town. Amazon purchases will still go on a credit card and then just be paid off once they hit.

[chen35]

Dave Ramsey would be mortified!


I agree with Angel, can you make weekly payments until you are done loan shopping? That should keep your balances pretty low.

[Tiny]

I have nothing constructive to add... but you could just 'prepay' your credit card... you'd have a negative balance - and I have no idea how that looks on a Credit Report.     If you have autopayments linked to your credit card or are lucky enough to be able to pay a utility or two with out penalty via credit card... i'd probably tally those guys up and make the payment so it credits a day or two before the actual charges occur.    

I've done the pre-pay a few times in the past - just because I was on-line, I was putting thru my season ticket order, I had the $$ in my checking account, and I didn't want to have to deal with staring at an astronomical amount due the next time I logged in to the credit card (too much math to subract the astronomical amount from the balance to see if the total amount was 'reasonable' for the month).   the last step of the season ticket renewal was to set up a payment for the next day to the CC from my checking account for the tickets.  


I have no other suggestions for what to do.

[The Walk of the Penguin Mich]

What would happen if you put a credit onto your credit card instead?

Deposit $1500 onto it and just continue to spend it down.  As you get to the end, redeposit another $1500.

[raeoflyte]

Apr 28, 2015 13:48:07 GMT -5 The Walk of the Penguin Mich said:

What would happen if you put a credit onto your credit card instead?

Deposit $1500 onto it and just continue to spend it down.  As you get to the end, redeposit another $1500.

This is what I was going to suggest.  Your debt should look like it is a 0 balance on the credit reports then.  

If you have to "pay off debt to qualify" then you're going to have to close the account as well which is a pain.  

[haapai]

I seem to recall looking at a credit report and having a pretty darn good idea when my credit card issuer reported to the credit bureaus.  It's just a matter of matching up the balance reported on the credit report and the day of the month when that balance applies.  Its easy to pin down the reporting date if you have a lot of transactions and therefore a different balance each day of the month. 

[quince]

I would not be comfortable using a debit card for everything: less protection, and you're out the money while fraud is evaluated. My husband only recently stopped keeping 10K+ in the account tied to his debit card. He keeps 5k now, enough to buy whatever and cover rent, as he makes the payment from that account. He does like to buy things with his debit card, because he doesn't like CC fees, even when we get cash back, so especially when paying at small, local businesses, he asks them what they prefer, and defaults to debit. 

If you really want to adhere to the advice, what about prepaid credit cards for your online purchases?

[haapai]

double post deleted

[muttleynfelix]

We closed 60 days after we applied and they actually didn't rerun our credit or if they did, the cc balance didn't change and I had run up a bit of a balance in that time to hoard cash for closing while I went over a month without a paycheck. So I don't know what the answer is.

[shanendoah]

I haven't tried to make overpayments on the AmEx, but my Citi card doesn't allow it. I've tried to schedule a payment for a week or so out, with charges I knew were pending but would clear by the time the payment went through, and it won't let me. So no, no getting a negative balance on the card.

We only use the AmEx at CostCo orthe grocery store, and we've bought all the big things we were going to buy for now, so using the debit card isn't a big deal.

The biggest issue is that we do a lot of shopping via Amazon. And as I said, I will NOT use my debit card for that. I'll just have to remember to pay down those purchases as they hit the card. But it also won't kill us to spend a little less money at Amazon for a few months.

[shanendoah]

muttleynfelix - I seem to recall that you sold your house before buying your second house. My problem really is the being right on the edge of the acceptable DTI. If I get over 50%, the loan won't get funded.

[raeoflyte]

Confirm with your lender that worst case scenario they will let you pay off and close an account to get back under 50% if you really need to, and then use a card that wouldn't cause too much heart ache to close if needed.  

[Bonny]

This situation sounds odd to me.

As I understand it as part of your back end ratio the lender calculates your minimum cc payment as if you maxed out every one of your cards regardless if you've never done it.

I'm tagging dondub so we can hear about his experience.

[muttleynfelix]

Apr 28, 2015 14:13:23 GMT -5 shanendoah said:

muttleynfelix - I seem to recall that you sold your house before buying your second house. My problem really is the being right on the edge of theacceptable DTI. If I get over 50%, the loan won't get funded.

Actually we didn't. We had a snafu with the appraisal in Missouri at the last minute they sent our Iowa stuff back through underwriting so we could close here while the Mo house got reappraised with an FHA qualified appraiser. If we waited to close here, wwe were going to be out more money for interim occupancy and our sellers here would have had a heart attack.

[Deleted]

I could live without a credit card for a couple months as long as I had a debit.  I wouldn't want to because I wouldn't want to lose all the rewards, but as far as day to day functioning it wouldn't change anything.