topic Re: Short term impact on credit score in Understanding FICO® Scoring

Short term impact on credit score

chadbnj — Mon, 10 Dec 2012 18:13:24 GMT

Hello,

I currently have a FICO score of 690 (TU 765, EQ 690, EX 715). I'm in the process of buying a new home. However, due to a divorce a few years back I've been rebuilding my credit since and making significant progress as of late by disputing certain items and also paying off or settling past problems. I had closed all my credit cards and the mortgage was paid off during the settlement. I recently (3 months ago) got a new cap one credit card with a very low limit (my score was significantly lower 90 days ago). Therefore, I have only one revolving account with a low limit and no other credit currently. I also have ZERO debt. My question is if I were to get a small car loan for say 10K would it have a negative or positive impact on my score in the short term? Any feedback would be greatly appreciated!

Thanks,

Chad

Re: Short term impact on credit score

RobertEG — Mon, 10 Dec 2012 18:47:43 GMT

It appears from your current score that you have pretty much removed all derogs, as having a score in the 700 range with only one open account indicates a pretty clean payment history.

With that assumption, my question would be... how soon are you planning to app for the mortgage?

App for an installment loan now would most likely result in little FICO gain, as it would involve a new inq and would add a new account with zero age to your AAoA calc.

While it might have an offset with an improvement in credit mix, it most likely will not have significant FICO impact one way or the other.

Perhaps more significantly, a lot would depend, in my opinion, on other non-FICO factors that will enter into a mortgage app process, such as total income, assets, and debt.

Some mortgage lendors, for example, dont like to see acquistion of other new debt just prior to the mortgage app pocess.

If I were in your situation, I would most likely contact the prospective mortgage lendor and ask the same question of them, since a mortgage app process involves quite a bit more than just a three digit FICO score, and only they can tell you how they would view it. They may like it, or advise against it.

Re: Short term impact on credit score

Brandnick — Mon, 10 Dec 2012 19:04:53 GMT

In the short term

The following would happen

an hard inquiry - small score decrease

New account - decrease in your score( due to a reduction in your average age of accounts)

However the good news is that it's will all get better within months a rule is dont app for anything atleast 6 month before going for a mortgage

Re: Short term impact on credit score

chadbnj — Tue, 11 Dec 2012 14:51:13 GMT

Excellent answer. I really appreciate your input! Heading to the lender today and will let you know.

Re: Short term impact on credit score

chadbnj — Tue, 11 Dec 2012 14:52:52 GMT

Thanks for your valued feedback Brandnick. Much appreciated. I'll let you know how it's goes.