This topic contains 7 replies, has 4 voices, and was last updated by Anonymous 8 years, 2 months ago.
- May 6, 2011 at 7:07 am #207332
…paying down credit cards? I want to get my credit score up a little more, but I’m not sure what would be more beneficial. Pay off my auto loan completely? Or do I pay down some of my credit cards with high limits? Which is the best option to improve my credit score? Also if I pay down some of my credit cards will my limits get reduced?
- May 13, 2011 at 11:22 pm #275266
In this situation I would pay down your credit cards balance, that is the best use of your money.
If you pay off the auto loan, it won’t help your score as much as taking your utilization down on your credit cards.
To answer your question, your limits will not be reduced if you pay down the balances.
- May 19, 2011 at 3:14 am #281258
Paying off the auto loan will probably lower your overall debt to income ratio improving your credit score. Pay off the car as soon as you can and then start throwing what you were paying in car payments towards the credit cards to get those paid off. Yes, some of your credit cards may lower your limits because of it, or for no reason at all, as the credit card companies are screwing everyone lately.
- June 10, 2011 at 4:21 am #437099
The lenders are trying to recapture their losses. The fed funds are also for short term money loans & a mortgage is not a short term money loan.
- June 10, 2011 at 4:21 am #437100
30 years is a long time.
Interest rates aren’t going to stay at 1% forever.
The interest rate cuts tend to affect short term borrowing.
- June 10, 2011 at 4:21 am #437101
the fed rate you’re refering to is the rate for overnight borrowing to what is in the industry referred to as window loans – loans that keep the banks liquid amounts where the government requires.
funding for mortgages, which are long term by nature, comes from investors. there are still too many nervous people hessitant to invest in mortgages again.
so basically, these two pools of money come from different sources and while one might be inclined to think they should move the same direction, there is nothing that really ties them together.
- June 10, 2011 at 4:21 am #437102
You have to understand that the economy is still on a downward spiral and the government, including the FED, is trying to figure this mess out. Although the bailout plan has been passed, it is not in affect right now and it may be some time before it is implemented, causing most banks and other lenders to hesitate dropping mortgage rates.
Eventually, everything will work itself out and banks will get back to lending, but there will be much broader oversight and loans for business and home purchases will not be as easy to get as they were in the past.
- June 10, 2011 at 4:21 am #437103
The Federal Reserve does not set mortgage rates. The market for mortgage backed securities drives rates. With the government taking over Freddie and Fannie, in the longer run rates should come down because the Treasury is guaranteeing those securities explicitly so there is no difference in the risk between Treasuries and Freddie and Fannie securities, but there is still a huge spread in the yields on those two investments. Once the market recognizes this, the yields on the MBS should fall in line with Treasuries of the same maturity. There may be a small difference for liquidity premiums and transaction cost, but not the huge difference that has existed and grown for the last year.
Talk about inflation has caused rates to rise in the last week or so, but flagging consumer confidence and, therefore, reduced spending should help to mitigate those concerns and rates will come back down.
I hope this answer was helpful.
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