Need help or advice on my Cash-out-refi

[Obdia Whitmore]

Hi BP family,

I have an issue that I need some advice and possibly help on. I recently rehabbed a three unit in Chicago.

My plan was to do the BRRRR method, but my credit score dropped tremendously due to me using my credit

cards to help with the rehab because of theft. Any advice would be appreciated.

Thanks! 

[Chris Mason]

Originally posted by @Obdia Whitmore:

Hi BP family,

I have an issue that I need some advice and possibly help on. I recently rehabbed a three unit in Chicago.

My plan was to do the BRRRR method, but my credit score dropped tremendously due to me using my credit

cards to help with the rehab because of theft. Any advice would be appreciated.

Thanks! 

 Hi Obdia,

Tough pill to swallow, but this does come up often. If there is equity in the deal, you can finance the discount points into the loan balance to get the rate where you want it. This will typically  be less than the closing costs of a 2nd refinance (and certainly less hassle) once the cards are paid down and your FICO jumps to where it should be.

Also note that FICO does not 'remember' CC balances for scoring purposes. This means that if you're willing to wait a month, you can do one of two things...

- Pay the balances down using other funds.

- Call the credit card companies, request a credit limit increase. Owing $9k on a CC with a $10k limit is at 90% utilization and will hurt you, but if they bump the limit to $20k then that same $9k is only 45% utilization, which is a lot better for FICO scoring purposes. 

Another fun fact for your future planning and/or for lurkers: HELOCs do not ding you for high utilization % in the same way as credit cards.