Dear Dr. Don,

We received a decent bonus this year and are trying to figure out the most effective way to use it. We recently purchased a house and the homeowners association requires that we landscape the yard by May 1 this year. It is a fairly large yard and will require the whole bonus amount just for the basics.

Also, due to car troubles, we have nearly maxed out our main credit card and have taken a big hit on our credit scores. Should we pay down our credit card and get a home equity loan to fund the landscaping? Or should we use the money we have for the landscaping and apply for as little credit as possible?

— Michelle Mulch

Dear Michelle,

You didn’t mention how much equity you have in your house, but a home equity loan can tap the available equity in the house. The smaller the equity cushion, however, the higher the risk to the lender. Higher risk means higher rates on the loan, especially since your credit scores already have taken a hit.

Paying down your credit cards only to run the balances right back up to finance the landscaping isn’t going to do much for your credit history, so that’s not a recommended alternative. I like the alternative of paying cash for the required landscaping. You may also be able to negotiate a discount with the landscaper for paying cash.

Bringing down your credit balances over time will reduce your credit utilization. That, along with making timely payments on your credit accounts, will improve your credit scores. Credit history is one place where time does heal all wounds.

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