How to handle revolving debt to improve approval rates
  • Alan Hayon

How to handle revolving debt to improve approval rates

Updated: Sep 19, 2019


We’ve all seen that having high revolving balances can sometimes make or break an application. Here is an actionable credit tip.


Opening and maintaining credit cards is a necessity for most consumers looking to build credit. However, when those same consumers fall into debt or on hardship, it negatively affects:


1. Utilization ratio 2. Debt ratio 3. Credit scores


Making borrowing difficult without paying off the revolving debts. What if they don’t have the liquidity for both the down payment and their debt though?


Here’s what I recommend:


Lately, online lenders like Sofi, Marcus by Goldman Sachs and others have come up with a pretty good solution. An installment loan up to $50k to satisfy a revolving debt, with rates ranging from 5-8%. This makes for a much better option for most borrowers. Plus, since this is considered an “installment” account and not considered a “revolving” account, the borrowers benefit greatly.


Including:


1. Improved trended data (great for score) 2. Low utilization ratio (great for score and underwriting) 3. Lower debt ratio (since installment loans have up to 7-year terms)


For Example:


Debt: $50,000 Utilization: High Monthly Payments: $2,500 FICO: 620 Account: Revolving


Debt: $50,000 Utilization: Low Monthly Payments: $779 FICO: 680 Account: Installment


Have a question about credit improvement? Feel free to contact Alan Hayon at 800-965-6405. Alan Hayon is a FICO® Professional and President of C.A.G. Credit Services who and has been helping Loan Originators and borrowers improve their credit since 2011. Prior to moving into credit repair, Alan Hayon was also a Loan Originator since 2001 giving him a unique expertise in credit repair as it relates to mortgage lending.


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