Secured Loan 6 months before buying a house

[FKaspar04]

A little information:

I have a 677 (TU,Equifax) credit score. I have two negatives on my credit report:

1. Credit Utilization is 51%. 

2. Payment history is 95%
This is on all 3 of my Discover Student Loans. I have 3 seprate loans with them that all get paid through one monthly payment.
One of the loans has 3, 90 days or more late payments made in 2020/2021 (Due to the pandemic and little to no relief)
One of the loans has 3, 90 days or more late payments made in 2020/2021 (again due to pandemic)
The last loan only has 2 payments at 30 days and 1 late payment at 60 days (same issue)
A few of the late payments look a little sketchy and I don't think this is accurate but can look further at Discover to figure out.
The reason there are late payments is because of the pandemic and when I asked for relief they only gave it to me on one loan and not all 3 but I was under the assumption that it was all 3, so I did not make payments while I was not working and not making any income. But

My husband and I want to buy our first home this year. We are looking to get out of our apartment come October. I am trying to do a few things... 1. lower my debt and 2. boost my credit report.
I am really looking at impacting the credit card utilization because that I find to be the easiest solution. I was thinking about taking out a $23,000 secured loan (my car would be put up for collateral) and pay off all my credit cards and 2 other personal loans that I have (with the exception of our joint CC).

How is this going to impact my chances of getting a mortage loan? My husband has great credit (800s) and no debt. 

[ShanetheMortgageMan]

Good news is that your credit history should be able to qualify for a mortgage right now, as it looks like the most recent delinquency was ~3 years ago which is more or less ancient history when it comes to mortgage underwriting guidelines.  

To answer your questions though, paying off high utilization revolving debt with an installment loan is a tried & true solution to improve your credit scores.  Your scores will take a hit from the new installment loan account, but odds are that the score increase from paying off credit cards will outweigh that so you'll likely see an overall improvement in scores.  Paying off the existing installment loans might could hurt your scores too.  

30 days before you apply, I'd make sure you put a small balance on one your credit cards.  This will give you a higher credit score than if they are all at $0 balances.  I'd also make sure you have at least 3 or 4 credit cards, as mortgage scores improve quite a bit once you have that many reporting each month.

[JoeRockhead]

Welcome to the forum.

Opening a new loan, CC, or even applying for new credit so close to trying to qualify for a mortgage is generally a big no-no. I also have to question the loan you're looking at. First, not good to put your vehicle up as collateral. Second, and probably more important, is I hope this isn't a high interest title loan, more not good.

Without more information, generally what will give you the best bump to your scores is going to be to get the credit card balances down. You'll see a score improvement when you get your aggregate UTI below 49%. The lower it goes, the better it is for your scores. This however doesn't account for whether or not you have any individual cards with really high balances.

To get the best advice, it would be better if you share how many accounts you have, and either the UTI on each one, or list the balances and credit limits. Then people can chime in with more specific advice on the best path to follow.  

[FKaspar04]

Thank you for this.
I did find a loan that is unsecure (so I wouldn't need to put my car up for collateral) but of course high interest rate.
As far as my accounts go: I have 2 private student loan accounts and 1 federal student loan account (multiple loans but all wrapped up into one payment)

I have two credit cards. 
1. Discover - Credit limit $5550 - using 91%. Total balance $5011.
2. Capital One (I am an authorized user on this, both my husband and I use it) - Credit limit: $30000, using $19,197.55 (over 50%)
This card would not be paid off with the personal loan that I am debating on.

One Auto Loan - 26% left to pay ($16,678 loan and $4352 left to pay)

Three personal loans:
1. Upstart - $407 left (paid this today so the balance will be $0)
2. Upgrade  - $13,500 loan, and $1800 left to pay (would be consolidating this debt with new loan)
3. BestEgg - $14,500 loan, $13,287 left to pay (would be consolidating this debt with new loan)

Hopefully this is helpful for more specific advice.

[FKaspar04]

Thank you! I was thinking the same thing. I would still have one credit card opened with a balance after the personal loan so that I would not have $0 balances all the way around. I just feel like this method would allow me to get my Debt-to-Income ratio down, save me $550 a month in payments, and help make things more streamlined for me. 

[ShanetheMortgageMan]

What is the interest rate & term (duration) of the new unsecured loan?  What are the interest rates on the debts you are paying off?  And remaining months on the Upgrade & BestEgg loans?

You'll want to open 2 more credit cards soon & you might want to get removed as an authorized user from the Capital One card.  You can test which way is better by checking your scores with Discover + 2 new credit cards + AU on Capital One, then get removed as an AU on the Capital One card and re-check the scores to see if it improves.  If it doesn't, then get re-added as an AU.