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Credit Crossroads - Auto vs. New CC, or both?

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lahtiji
Valued Member

Credit Crossroads - Auto vs. New CC, or both?

I’m finding myself at a bit of a crossroads.

 

After gardening for more than 18 months with a secured MC from my CU, I obtained a QS1 from C1 and opened an Amazon TL, both in October 2014. I’ve been cultivating those, and experimenting with utilization, trying to find my sweet spot. I recently got a 2K luv button CLI from C1, waiting to see if I also get a $500 boost via Credit Steps. Tried a CLI with Amazon, but no luv. Amazon did give me an automatic CLI few months back.

 

Utilization right now is at or beneath 10%, with both the secured MC and Amazon store card currently reporting zero balances. DTI is about 25% (though I am currently a renter). I have 1 inquiry reporting on EQ and EX, and 2 on TU.

 

Most baddies have aged off my reports, with the last ones set to be gone by the end of the year: a WaMu/Chase CO, and two 30-day and one 60-day late from a car loan. I am working on resolving the lates by GW with Santander, who took over the loan from HSBC, but don’t have much hope, based off what I’ve read here.

 

Unsurprisingly, my scores aren’t budging that much. I think the new accounts, while reporting positively across the board, are too new to put much upward pressure on my scores.

 

According to FICO, the factors most affecting my score on the downside are the delinquencies, low number of TL with recent positive payment history (just the secured MC, the C1, and Amazon), and lack of recent non-mortgage installment loan activity.

 

I am likely going to need a newer car in the next few months. Right now my scores are right on the line between tiers as far as I’ve been able to research, based off FICO Auto 8 scores (679 EQ, 677 TU, 676 EX). Income is stable and sufficient for loan amounts for which I’d be applying.

 

I’m not so concerned about the scores taking a hit from inquiries, especially for the auto loan, as I know those will ultimately be scored as one inquiry.

 

What I’m considering is opening another CC to increase my available credit, drive down my utilization that much more, and have more positive pay history. But are a few months of positive payment really going to help? If I drop my EQ Auto Score a few points, is it likely to climb back up in a month’s time with better data elsewhere?

 

The score simulator predicts about a 5-point score drop for opening a new CC, regardless of limit, and a 5- to 20-point drop for taking out an auto loan.

 

I know the general rule is not to apply for credit you don’t need, but in terms of strategy, is it a dumb choice to open a new CC? Should I just focus my energy on the auto loan?


Starting Scores: EQ 624 2/4/13 TU 548 *ouch* 2/1/13 EX 566
Current Scores: 3/22/16 EQ 744 FICO TU 754 FICO EX 740 FICO


Take the myFICO Fitness Challenge




Capital QS One $11,500 | SkyMiles Platinum AmEx $11,500 | Discover it $11,500 | Amazon SC $5,000 | Citi Simplicity $4,000 | Walmart SC $3,500 | Chevron/Texaco SC $2,500 | BrightStar CU Platinum Visa $2,500

Gardening for the forseeable future.
Message 1 of 4
3 REPLIES 3
thom02099
Valued Contributor

Re: Credit Crossroads - Auto vs. New CC, or both?

 


@lahtiji wrote:

I’m finding myself at a bit of a crossroads.

 

After gardening for more than 18 months with a secured MC from my CU, I obtained a QS1 from C1 and opened an Amazon TL, both in October 2014. I’ve been cultivating those, and experimenting with utilization, trying to find my sweet spot. I recently got a 2K luv button CLI from C1, waiting to see if I also get a $500 boost via Credit Steps. Tried a CLI with Amazon, but no luv. Amazon did give me an automatic CLI few months back.

 

Utilization right now is at or beneath 10%, with both the secured MC and Amazon store card currently reporting zero balances. DTI is about 25% (though I am currently a renter). I have 1 inquiry reporting on EQ and EX, and 2 on TU.

 

Most baddies have aged off my reports, with the last ones set to be gone by the end of the year: a WaMu/Chase CO, and two 30-day and one 60-day late from a car loan. I am working on resolving the lates by GW with Santander, who took over the loan from HSBC, but don’t have much hope, based off what I’ve read here.

 

Unsurprisingly, my scores aren’t budging that much. I think the new accounts, while reporting positively across the board, are too new to put much upward pressure on my scores.

 

According to FICO, the factors most affecting my score on the downside are the delinquencies, low number of TL with recent positive payment history (just the secured MC, the C1, and Amazon), and lack of recent non-mortgage installment loan activity.

 

I am likely going to need a newer car in the next few months. Right now my scores are right on the line between tiers as far as I’ve been able to research, based off FICO Auto 8 scores (679 EQ, 677 TU, 676 EX). Income is stable and sufficient for loan amounts for which I’d be applying.

 

I’m not so concerned about the scores taking a hit from inquiries, especially for the auto loan, as I know those will ultimately be scored as one inquiry.

 

What I’m considering is opening another CC to increase my available credit, drive down my utilization that much more, and have more positive pay history. But are a few months of positive payment really going to help? If I drop my EQ Auto Score a few points, is it likely to climb back up in a month’s time with better data elsewhere?

 

The score simulator predicts about a 5-point score drop for opening a new CC, regardless of limit, and a 5- to 20-point drop for taking out an auto loan.

 

I know the general rule is not to apply for credit you don’t need, but in terms of strategy, is it a dumb choice to open a new CC? Should I just focus my energy on the auto loan?


Disregard the score simulator -- they are worthless.  Conventional wisdom is that a new inquiry and TL will result in about a 10 point drop (give or take a few/this from a credit analyst speaking in general), but over time you'll regain that, plus a net of 5 points once the TL ages some 

 

If it were me, I'd wait out the next few months, give your current history a chance to age a bit more, see where your scores are at that point.  I would not apply for another credit card, if I were in your shoes, til after the car loan is resolved.  Reason = From your post, it would appear that the new(er) car is a NEED.  The credit card is a WANT.  Big difference.  Fulfill the NEED first, then look at the WANT at a later time.

Message 2 of 4
lahtiji
Valued Member

Re: Credit Crossroads - Auto vs. New CC, or both?

Thanks for the response.

 

After putting it all down in writing, I knew what the right course was going to be, and it's what you said.

 

I'll let what I have age, keep at the GW efforts, and find out what I can about finance rates in the meantime.


Starting Scores: EQ 624 2/4/13 TU 548 *ouch* 2/1/13 EX 566
Current Scores: 3/22/16 EQ 744 FICO TU 754 FICO EX 740 FICO


Take the myFICO Fitness Challenge




Capital QS One $11,500 | SkyMiles Platinum AmEx $11,500 | Discover it $11,500 | Amazon SC $5,000 | Citi Simplicity $4,000 | Walmart SC $3,500 | Chevron/Texaco SC $2,500 | BrightStar CU Platinum Visa $2,500

Gardening for the forseeable future.
Message 3 of 4
takeshi74
Senior Contributor

Re: Credit Crossroads - Auto vs. New CC, or both?

Derogs are holding you back.  That's why the first course of action we always recommend is to address derogs.  You don't need to add new accounts.  If you intend to buy a car then get your reports clean and then pursue the auto loan.

Message 4 of 4
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