I just opened three secured personal loans. Will this hurt me or up me now or in the next 6 months?

[Anonymous]

Hi, 

Question for anyone that has tried this or might have insight. My payment history is the worst part due to students loans I let get far behind twice. I have 4 credit cards, 1 with bank of america I had for year and just converted from secured to unsecured $1500 limit, 2 capital one cards with $300 limit unsecured opened in last couple months and walmart store card with $600 limit opend couple of months ago. Utilization is less than 15% and just paid all them off this month so zero utilization. I have one loan but only shows up on TU for business and personal. Tons of inquires trying to get cards but have just stopped about 15 for last couple years. 

Since my payment history due to student loans is bad I decided instead of opening one personal secured loan for $3000. I opened 3 $1000 secured personal loans through my credit union. We are planning to buy a house in next couple of months if possible. I can pay them off at any time in case mortgage loan indicates to much debt and term is for 1 year with $86 payment each. I intend to pay them off in 6 months to get me 18 recorded payments and also will pay down debt in the first month in half so it shows that balance was $1000 and is now $500.

How will this effect my score now? 6 months?

Thanks for input in advance.

[jamie123]

You gotta slow down.

Building credit and good credit scores is a marathon and not a sprint.

First off, mortgage lenders like to see a quiet period on your reports of at least 6 months and more like 1 year before you apply for a mortgage. That means for 1 year the only thing going on in your reports is you keeping the balances low and paying all your bills on time. It demonstrates that you are a stable person and not like you are credit chasing and trying to manipulate your scores.

They will go through your past year and maybe two and ask you why you applied for any credit during that period. Well? Why did you apply for three $1000 loans at the same time from the same lender? I'm not trying to be a jerk but am trying to get you ready for the questions you may be asked.

If you really are applying for a mortgage within 6 months you need to quit apping for credit right now and just run with what you have.

To answer your questions...

I really need a lot more information to give you accurate advise. How recent was your most recent late? How many lates do you have? What are your current scores? Any other baddies?

I think that in the next 3 months your scores will be slightly lower than they are now but by 6 months they will be slightly higher than they are now. A year from now your scores should be a lot higher than they are now.

[Anonymous]

Hi Jaime,

Thank you for information. I don't mind the truth at all LOL. You are right I have been too much in a hurry. I guess it is because I need some cash flow for my business this couple months to prepare for beginning of next year. A mortgage would look better on my credit and thats why I was targeting it first before applying for line of credit. All the inquiries are definitely effecting my credit.

"They will go through your past year and maybe two and ask you why you applied for any credit during that period. Well? Why did you apply for three $1000 loans at the same time from the same lender? I'm not trying to be a jerk but am trying to get you ready for the questions you may be asked." This is a very good question and best I could answer is the truth LOL.  I did it to create a good pattern of behavior which I am at now and wanted to show that I can pay.

"If you really are applying for a mortgage within 6 months you need to quit apping for credit right now and just run with what you have." Agteed. It took me while to destroy my credit and it has been year so far of re-establishing it. I should have been more concerned with it two years ago when I started my company and learned more.

To answer your questions...

I really need a lot more information to give you accurate advise. How recent was your most recent late? How many lates do you have? What are your current scores? Any other baddies?

Here is my history - 

Negatives

2 or 1 depending which bureau you look at. Medical bills totalling maybe $2600 which will fall off in March or sooner if I can get them to remove it. Been trying every month. I asked for paperwork verifying debt which I really have no knowledge of but sure might be accurate but can not tell unless they send me prove.

2 Dept of Edu loans defaulted - $ 5000 total - 3 years ago. They don't show up on Transunion. I am 3 months into rehab and designed to be updated or out of default in April. Can i get the bureaus to note that they are being rehabbed or will that make a difference?

2 Loans from Nelnet - zero balance - that I rehabilitated but still are negative with one bureau for some reason. I just noticed it after a thorough review of credit and should be able to have them update. (noticed Experian is being very anal with their payment status description "over 180 days past due" no current or paid which it is. Do you know if rehabbed loans should be positive? I have read that the negative payment history will continue to show until they fall off. I can get the payment status changed but was also thinking of calling Nelnet to see if they can remove negatives?

1 Acs student loan that shows 120 days late as early as March of this year. - Nothing I can do here except pay it off and submit a paid in full notice to bureau or might leave it alone once I do? Current shows in foreberance. Will try to pay off before March $2000 balance.

Goods:

I have had Bank of America credit card with $1500 limit I opened year ago and just converted to unsecured month ago and have never been late and util is close to zero percent or about 15 at most.

1 Cap One Platinum card with $300 limit - never late and $0 balance 4 month old- will try to raise limit in December

1 Cap One Quick Silver with $300 limit - just opended used up to $80 and paid off - does not show yet

1 Walmart Store Card $600 limit - zero balance 4 months old

1 Old Car loan I paid well 8 years ago 10k

1 Business/ personal loan paid on time for 11 months - $450 payments

3 loans I just opened up doesn't show yet. I did pay them down to $500, $750 and $770 before first payment. Curious as to if this will work LOL. 

My fico's are 610 Equiafax, 614 TU and 640 Experian. My wife is about the same. I am thinking this will work and 6 months from now I should be in high 600's but time is on my side. Was thinking of applying next month but will consult with someone first. Any suggestions would be helpful. Thanks again.

[Anonymous]

Forgot one more Goodie.

Conns - 6 months old on time $51 payments, $1100 balance reported.

[takeshi74]

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@Anonymous wrote:

We are planning to buy a house in next couple of months if possible.

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It's not just your score that you need to be concerned about.  Standard advice is do not add any credit for 6 months to a year prior to buying a home.  Those new loans will definitely not help you with the mortgage.  Several of those credit card accounts are also too recent.  Even beyond just the new mortgage the new loans mean you incurred hard pulls and you dropped your AAoA.

Carefully do your research first in future as the advice above is easily found with little effort.  Adding personal loans won't help with your derogs.  You need to hit the Rebuilding subofurm and see what you can do to address the derogs.  You won't make any progress until the derogs are addressed as they have a major impact and will always hold one back.

It sounds to me like you'll need to push back your plan on the mortgage.

[jamie123]

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@takeshi74 wrote:

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@Anonymous wrote:

We are planning to buy a house in next couple of months if possible.

---

It's not just your score that you need to be concerned about.  Standard advice is do not add any credit for 6 months to a year prior to buying a home.  Those new loans will definitely not help you with the mortgage.  Several of those credit card accounts are also too recent.  Even beyond just the new mortgage the new loans mean you incurred hard pulls and you dropped your AAoA.

Carefully do your research first in future as the advice above is easily found with little effort.  Adding personal loans won't help with your derogs.  You need to hit the Rebuilding subofurm and see what you can do to address the derogs.  You won't make any progress until the derogs are addressed as they have a major impact and will always hold one back.

It sounds to me like you'll need to push back your plan on the mortgage.

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+1 Good advice there ^^^^^^^^^^^

The fastest way for you to raise your scores is to have the baddies removed. It sounds to me like most of your baddies, except the student loan lates, can be removed with a small bit of work on your part. You need to visit the "Rebuilding Credit" forum here and find out how to do PFDs (Pay for Deletes) and GW (Good Will) letters. It is really not that difficult to do and once you do the first one it is easy. YOU NEED TO DO THIS!

Mortgage approval, like most large loans, is about scores AND history. No matter what your scores are if you have ANY baddies that are less than 2 years old you will have a difficult time being approved for a mortgage. They are looking for stability!

If your wife's name is going to appear on the mortgage, and it is virtually impossible to find a lender that would only give you a mortgage without your wife's name on it, she needs to get her scores up too. They will use the lowest mid-score of both you and your wife.

An installment loan does help with history and proving you can pay things off to a point. A closed installment loan doesn't really do much for your scores. Your scores will actually drop as the installment loans are paid off. There are credit unions such as Alliant and SDFCU (State Department Federal Credit Union) that allow you to open a savings account and take out a 4 or 5 year $500 shared secured installment loan all without any HPs. You get all the points of having an installment loan without the DTI damage. You want a long term installment loan that you can keep open during the mortgage process that doesn't affect your DTI too much. The monthly payments on an Alliant four year $500 loan is $12 a month.

It also sounds like you are self employed and if that is the case it poses other issues that you can read about in the "Mortgage" sub-forum here. The amount of documentation required for a self employed person in getting a mortgage can be ridiculous.

I'm sorry to say that I agree with takeshi74 in that I see it taking you at least 1 year and maybe 2 years to be ready for a mortgage. If you get all your baddies off your reports, and it can be done, it could be sooner.

[Anonymous]

All great advice. Thank you guys. Very informative forum. I will hit up the rebuild forum and see what I can learn. Thanks and I am going to see a credit conselor next week so maybe he can write some letters to help.

Sam