Strategy For Improving Credit Score
REM # F643
By Ilyce R. Glink
Summary: A couple is planning on getting a new mortgage in a couple of years. Ilyce suggests using a home equity loan to pay off credit card balances and improve credit score.
Q: My husband and I are planning on selling our home in two years and building
a new home on property we purchased 3 years ago.
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I have been diligently paying down our credit card bills for the last 3 years (it feels like forever!) but I feel we would be better off financially if we went for a 24-month home equity loan to completely pay off the cards now.
Will a home equity loan negatively affect my credit score?
A: If you can trade non-deductible debt (that would be your credit cards) for
deductible debt (your home equity loan), you're generally better off. Not only
will you pay less in interest, but you should will be able to write off the
interest you pay if you itemize on your federal income tax return.
Paying off your credit cards should also help you improve your credit score.
Just don't cancel your credit cards once you pay them off -- that can have a
seriously negative impact on your credit history and score. Instead, keep them
active, use them once in a while, and always pay your bills off at the end of
the month in full, and on time.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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