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I'm A Credit Virgin And I Want It To Be Special

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pdxuser
Contributor

I'm A Credit Virgin And I Want It To Be Special

I have no credit history, and I'd like some opinions on how to develop as perfect a history and score as I possibly can. My only goal is to get a mortgage a few years from now. Everything I do with credit will be to get a high score and attractive-looking report for a manual review by a mortgage underwriter. I won't be trying to get new cards or higher limits. I will be the person who eats macrobiotic vegan raw food to be healthy, rather than the person who eats gourmet food to enjoy eating. I can be your guinea pig for developing a perfect credit history if you want.


Here's my plan so far.


I'm thinking I will apply for three Visas from various credit unions. Should it be four? I don't care if they're all $500 secured cards. The mortgage officer I talked to said credit limits don't matter to mortgage officers, because mortgages are going to be a lot bigger than any other credit line anyway. So I'm ok with tiny credit limits, even if they would make it harder to get a good credit card down the line. I don't want more credit cards. I want the ideal number of credit cards, and I want to get them all at the outset, so my average account will be as old as possible.


I'll use one card each month, alternating cards. The Card of the Month Club, or Carte du Mois, as HTSU might say if HTSU were French or a snooty Centurion holder. I'll charge a $5 Amazon gift card to my carte du mois (fancier sounding than "secured Visa," oui?), then pay it down to 1¢ before the statement, and PIF right after the statement, moving on to the next card for another $5 Amazon credit. By the end of the year I can buy myself a present from Amazon for being so responsible (read: uptight) about my credit usage.


I'm also thinking I will apply for one installment loan. Should it be two? I'll get a savings-secured loan, where I give my credit union $100 to lock into an account and they give me a $100 loan at 2% interest for 5 years. I can then repay $99.40 of the loan, get my original $99.40 back out of the locked account, and pay off the remaining 60¢ by one penny each month (plus 2% interest) via automated withdrawal from a separate 60¢ account. I will end up with 5 solid years of on-time payments with constant <1% util.


For actual spending, I'll use my checking account. If I ever need an emergency loan, I'll use the Bank of Mom and Dad. If it's a huge loan emergency (illness, I suppose), I'll do what I need to do and my plan will be ruined, but that's fine. My health is more important than my credit score.


So, does this look like the perfect plan? Three cards and one installment, with util as close to 0 as possible while staying active? No consumer finance lines, no retail lines, no auto lines (not that I will buy a car for the FICO score), nothing else?


Any concerns?


Also, what products should I use to check my credit history and scores? Should I pull my free annual credit histories a month after I get all my accounts? Or two months later, to make sure they all show up? Three? How often should I pull new credit histories, and with what product/company? Should I check my scores at the 6 month mark with Credit Complete? Or should I wait a little later to make sure I'll get a score from everybody? Will my boring credit plan be worth monitoring with ScoreWatch?


Thanks a lot!

Message 1 of 62
61 REPLIES 61
Junejer
Moderator Emeritus

Re: I'm A Credit Virgin And I Want It To Be Special

pdx, I will speak to a couple of these: CCs--If you are charging $5 per month, there would be no need to prepay before the statement cuts, unless your CL is $50 or less. Also, I don't think that you are going to find an installment loan for $100 @ 2%. It costs the bank/CU that much to approve a loan (manpower, paperwork, etc.). Set your sights a little higher for a loan. But, I could be wrong. One installment loan will do the trick for credit mix.






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Message 2 of 62
haulingthescoreup
Moderator Emerita

Re: I'm A Credit Virgin And I Want It To Be Special

*** Post title of the century!!! ***

 

I'm sorry, it's going to take me a while to recover from this one. whew




OK, better now.

For scoring purposes, you should have as many CC's as you have open installment and mortgage loans, PLUS some. I would say plus 2 or 3, since you're going to be one of those restrained credit users (good for you.) This is because of the way that the scoring formula treats the number of accounts with balances. You want it to be fewer than half, and you want to have some wiggle room. So if you're going to have a mortgage + a loan, that would mean two cards to cancel those out, plus 2 or 3 --probably two in your case.

You don't need to have a non-mortgage installment loan and a store/gas card. They help your score, but don't bother if you don't need or want them.

I wouldn't do all CU cards, despite how much I love them. I'd say two cards from CU's that will grow with you (ask the loan officer when you visit how high their CL's go; I would want to hear at least $5K), one MC/Visa from a nationally-known bank, and another card, maybe a store card, that is also from a national bank. If you don't want a store card, get a second MC/Visa issued by a national bank. (By national, I mean the big boys like Chase, Citi, BofA, US Bank, and so on.) If you're going to stick with just the mortgage, 3 cards will do --I'd go with one CU and two national bank.

This is because the FICO scoring formula does not give as much weight to CU cards, even though they are much more stable than bank cards. Smiley Mad They're not bad; they're just not as good. grrr

If you don't plan to rock and roll your credit and monitor frequently, I'd wait 6 months and pull all 3 FICO scores, which will also give you your reports, albeit a bit shortened. At some point pull the freebies, but you might want to figure out some way to alternate them with your FICO's. If you're willing to do so, you might want to subscribe to EQ Scorewatch, either from Equifax or from FICO (same product, essentially), just to keep a general eye on things. While it's true that fraudulent activity might< show only on one report, it will more likely be on all three, and since you're not worried about zombie debt collectors and all, that ought to be enough.

Please let us know how the deflowering goes!

Message Edited by haulingthescoreup on 10-25-2008 03:59 PM
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 3 of 62
pdxuser
Contributor

Re: I'm A Credit Virgin And I Want It To Be Special


@Junejer wrote:
@pdx, I will speak to a couple of these: CCs--If you are charging $5 per month, there would be no need to prepay before the statement cuts, unless your CL is $50 or less. Also, I don't think that you are going to find an installment loan for $100 @ 2%. It costs the bank/CU that much to approve a loan (manpower, paperwork, etc.). Set your sights a little higher for a loan. But, I could be wrong. One installment loan will do the trick for credit mix.

I'm guessing I'll have a bunch of $500 CLs. And by "bunch" I'm guessing 3 or 4. I don't know if one number is better than the other. So $5 will be 1% util. But if 3% util is better than 9% util, wouldn't 0.002% util be better than 1% util? I mean, if they're comparing me to everyone else in my bucket, wouldn't 0.002% util make me the best of my bucket? Besides, it's not that hard to just go back online a couple days later and transfer $4.99 to my card.

 

I just got off the phone a couple hours ago with my CU, which said that I could make the loan as small as I wanted, and the rate is 2% above the savings rate (and my savings security deposit generates interest, so it balances out to 2%). I specifically asked if I could have a 5-year, $500 loan, pay it down to 60¢, and put the remainder on automated withdrawals, and they said "sure, but why not make it $100?"

Message 4 of 62
pdxuser
Contributor

Re: I'm A Credit Virgin And I Want It To Be Special


@haulingthescoreup wrote:

*** Post title of the century!!! ***

 

I'm sorry, it's going to take me a while to recover from this one. whew


I'm a credit virgin but an attention whore. Smiley Wink

Message 5 of 62
Scamp
Valued Contributor

Re: I'm A Credit Virgin And I Want It To Be Special


@haulingthescoreup wrote:

*** Post title of the century!!! ***

 

I'm sorry, it's going to take me a while to recover from this one. whew


 

+1 Smiley Very Happy Smiley Very Happy Smiley Very Happy

 

_____________________________________________________________________________
It's never too late to become the person you might have been. ~George Eliot

02/12/09 EX: 701 / 02/08/10 EQ: 719 / 02/08/10 TU: 723

Backdoor Numbers, Credit Scoring 101, Understanding Your FICO Score PDF
Message 6 of 62
haulingthescoreup
Moderator Emerita

Re: I'm A Credit Virgin And I Want It To Be Special


pdxuser wrote:

@haulingthescoreup wrote:

*** Post title of the century!!! ***

 

I'm sorry, it's going to take me a while to recover from this one. whew


I'm a credit virgin but an attention whore. Smiley Wink



LOL, it worked. I did manage to edit my reply and try to say something semi-useful.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 7 of 62
pdxuser
Contributor

Re: I'm A Credit Virgin And I Want It To Be Special


@haulingthescoreup wrote:

For scoring purposes, you should have as many CC's as you have open installment and mortgage loans, PLUS some. I would say plus 2 or 3, since you're going to be one of those restrained credit users (good for you.) This is because of the way that the scoring formula treats the number of accounts with balances. You want it to be fewer than half, and you want to have some wiggle room. So if you're going to have a mortgage + a loan, that would mean two cards to cancel those out, plus 2 or 3 --probably two in your case.
You don't need to have a non-mortgage installment loan and a store/gas card. They help your score, but don't bother if you don't need or want them.
I wouldn't do all CU cards, despite how much I love them. I'd say two cards from CU's that will grow with you (ask the loan officer when you visit how high their CL's go; I would want to hear at least $5K), one MC/Visa from a nationally-known bank, and another card, maybe a store card, that is also from a national bank. If you don't want a store card, get a second MC/Visa issued by a national bank. (By national, I mean the big boys like Chase, Citi, BofA, US Bank, and so on.) If you're going to stick with just the mortgage, 3 cards will do --I'd go with one CU and two national bank.

This is because the FICO scoring formula does not give as much weight to CU cards, even though they are much more stable than bank cards. Smiley Mad They're not bad; they're just not as good. grrr

The mortgage officer I talked to said installment loans are especially helpful for the types of scores mortgage lenders pull, so I'll go with at least one of those. Maybe two? If I go with 1 installment loan, then maybe I can have 1 CU Visa, 1 store card, and 2 national bank Visa/MCs? Why not Discover or Amex, not that I was planning on them? Also, by store card, we're talking a store credit card that is not a Visa/MC/whatever, right?


If you don't plan to rock and roll your credit and monitor frequently, I'd wait 6 months and pull all 3 FICO scores, which will also give you your reports, albeit a bit shortened. At some point pull the freebies, but you might want to figure out some way to alternate them with your FICO's. If you're willing to do so, you might want to subscribe to EQ Scorewatch, either from Equifax or from FICO (same product, essentially), just to keep a general eye on things. While it's true that fraudulent activity might show only on one report, it will more likely be on all three, and since you're not worried about zombie debt collectors and all, that ought to be enough.

If I pull my scores 6 months after all my accounts begin, can I be sure that 6 months of history for all accounts will be on all three reports and that all three reports will therefore have a credit score based on all my accounts? Or should I wait a month or two extra for padding? Also, I want to be sure that all my accounts report to all three agencies. Can I trust the lenders' word, or should I check all three reports a couple months after my accounts open to be sure?

Message 8 of 62
pdxuser
Contributor

Re: I'm A Credit Virgin And I Want It To Be Special

Also, HTSU, would 3 national bank Visa/MCs be better than two of those and one CU CC? That is, are CU CC's always less potent for a FICO score, or does one help with credit mix? And how do you know that store/gas cards help with credit mix? I've never seen a very detailed explanation of credit mix beyond "revolving, installment, mortgage."
Message 9 of 62
haulingthescoreup
Moderator Emerita

Re: I'm A Credit Virgin And I Want It To Be Special


@pdxuser wrote:

 

The mortgage officer I talked to said installment loans are especially helpful for the types of scores mortgage lenders pull, so I'll go with at least one of those. Maybe two? If I go with 1 installment loan, then maybe I can have 1 CU Visa, 1 store card, and 2 national bank Visa/MCs? Why not Discover or Amex, not that I was planning on them? Also, by store card, we're talking a store credit card that is not a Visa/MC/whatever, right?


If you don't plan to rock and roll your credit and monitor frequently, I'd wait 6 months and pull all 3 FICO scores, which will also give you your reports, albeit a bit shortened. At some point pull the freebies, but you might want to figure out some way to alternate them with your FICO's. If you're willing to do so, you might want to subscribe to EQ Scorewatch, either from Equifax or from FICO (same product, essentially), just to keep a general eye on things. While it's true that fraudulent activity might show only on one report, it will more likely be on all three, and since you're not worried about zombie debt collectors and all, that ought to be enough.

If I pull my scores 6 months after all my accounts begin, can I be sure that 6 months of history for all accounts will be on all three reports and that all three reports will therefore have a credit score based on all my accounts? Or should I wait a month or two extra for padding? Also, I want to be sure that all my accounts report to all three agencies. Can I trust the lenders' word, or should I check all three reports a couple months after my accounts open to be sure?


As to how many installment products make mortgage loan officers happy, you'd do best to check back with her/him. However many you wind up with, just make sure to plan on getting the same number of revolving accounts (= CC) plus a couple to balance them out.

 

I left out Discover and AmEx due to your credit purity, and they typically like to see someone with some, err, experience.

 

Yes, to count for the retail/gas card category, it can't be co-branded. In other words, it can't have an MC/Visa/AmEx/Discover logo as well.

 

Good idea to give it an extra month for everyone to report. For the credit-obsessed among us, TrueCredit and the others let us know if everything is in. Equifax and most especially TU can be terrible dawdlers.

 

And good point about reporting to all three. National bank cards do, but you never know with local credit unions. This would definitely be a question to ask before applying, because it's pretty maddening to have great credit that only shows up on one report.

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 10 of 62
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