Credit Question

[Priscilla Z.]

I have someone who is trying to qualify for an FHA Loan. He has a credit score of 680, but has 5 credit cards, most of them close to their limit.

He is coming into some money and can pay down some cards, and asked me how he should do it so that it helps his credit score and looks good for him to qualify for his FHA Loan. Here's the two options I came up with for him with the amount of money he has to do this.

1. He can pay 3 credit cards off completely, two with $800 limits and one with a $4,400 limit. The other two ($6,500 each) would remain at 95% of their limit.

2. He can pay off 2 credit cards completely, the two with the $800 limits, and he can pay down the other 3 to 50% of their limits.

Each one would be saving him money on monthly payments, with option 2 saving him more money. The way I see it, option 2 of having two cards paid off completely and 3 cards at 50% of their limit looks better than option 1, but this is not my area of expertise, so I come here to the experts.

Any input would be appreciated....