High DTI and utilization - need HELOC to consolidate - what options do I have?

[nomoneytowaste]

Very funny you would revive this old post and ask - but I'm glad you did!

So my situation had only gotten worse in the last 5-6 months.  My monthly minimums were exceeding my income and I was making payments, then using the card to make purchaes to survive.  Ugly situation.  I recently decided to dig back in.

My credit scores were even worse than before...but I got a little more tenacious.  What were my scores and what were banks really requiring?  I had a mid-600's Experian, but under 600 EQ and TU.  I dug into a couple threads of "who pulls what bureau?" and discovered TD Bank was one of the few that pulled EX.  I called them to find out their minimum - and all you needed was a EX 660 Fico 2 mortgage score to qualify.  (By the way, Shane was right....upper 600's would be enough to qualify with many lenders!)

I made partial payments to 2 small cards (under $1000 total payments), which brought utilization under a threshhold for those 2 accounts and sure enough...once they reported, I was at a 667 EX Fico 2!  I applied this past week and I already have a conditional approval!  Now, I will of course have to use much of the proceeds toward payoffs in order to reach a sub-43% utilization AFTER closing - to include the new HELO payment.  But this is completely fine with me - the purpose is to consolidate anyway, not just add more debt.

Funny enough, I have a score simulator on one of my credit card online banking apps....with a current TU 540, I checked a box that says "pay off all credit card balances".  It shows my score would jump 282 points - to an 822!  So again - my profile is strong;  but the utilization KILLS you!

I hope that this offers some hope to you.  Message me with specific questions and share what scoring you have with who and I may be able to offer some suggestions based on what I've learned  going through the process myself.  This forum has truly been a God-send to me and I'd love to be able to pay it forward!

[Living20057]

Does td taken into consideration your using the funds to pay down and that will lower your dti

[Dancer]

Hello, yes I  can use your help. I'm  not doing good. I'm  pretty much  in the exact same situation you was in. My score is 690 but my income  sucks with a ton of equity in my home. 

Can you please advise.  I deliver in Georgia. 

[nomoneytowaste]

If you have credit of 690+ and plenty of equity, then all you need to be able to do is achieve a 43% or lower DTI calculation (using gross earnings) AFTER payoffs.

This is typically very achievable because you can go out to 30 years on the HELO and bring $4000 in credit card/personal loan minimums into a $1000/month payment or less, for example.  Pretty simple to do the math and there are many free calculators out there to calculate your monthly payment based on a loan amount, interest rate, and term. 

Every bank and CU I spoke to will eliminate your credit lines being paid off from the monthly minimums used to calculate your new DTI.  Some may allow you to have a higher DTI than 43%, but that is TD's number and I imagine many want to see sub-50% DTI at closing.  What you do from there is up to you, as they do not require you to close the card accounts/lines.

When you say "income sucks" - this could be a problem.  Obviously no lender wants the risk of loaning money to someone who can't afford to repay it.  I have no idea what your situation is, but just do the math of your gross monthly income x .43.  This is the max that all the minimum payments on your credit report must stay under to get approved.  It would help to do research on how to strategize your card payments to improve how things are reporting.  Wealth of knowledge on this topic in this forum!