Should we take out a new credit card?

[Anonymous]

I was reading the other day that until you have 3 credit cards, taking one out will always increase your score. Is this true? My girlfriend is going to be getting a mortgage soon and they said if her score was over 780 (it's a jumbo loan) the intrest rate would be a lot lower. Her score was around 800 until she got a little carried away with being pre-approved. A lot of the new housing communities around here have a wait list and the only way they'll put you on it is if you've been pre-qualified with their lender, even though she has already been pre-approved by others. Anyways, her score dropped to 770-775 from all the pre-approvals we had to do. Her average age of credit is 5-7 years. Lots of student loans, auto loan and two cards that are paid off every month. Would it make sense for her to take out a new card to possibly get a small bump to over 780? I'm a little worried the impact on her age of accounts and hard pull would just hurt her score. We are also planning on leaving a very small balance on one of the cards this month because I know that can help a few points.

Would appreicate any advice! We are open to other ways to get a few point increase.

[Anonymous]

While 3 cards does seem to be beneficial for optimal scoring (also allowing you to use the AZEO strategy) opening a credit card prior to getting a home loan seems like a big no no. Her score may rise with the third card, but The inquiry, drop in aaoa and making age of youngest account more recent, might off set that. In the long run, a third card would most likely help her... but while in the hunt for a mortgage? I would assume that’s a bad idea. Try contacting one of the lenders she Pre-Approved with and see what they have to say. My guess is they will tell you no new credit

[Anonymous]

Given that she plans to buy a house very soon, she should not open any accounts (or apply for any) until she owns the home.

She should, however, do two things:

(1)  Subscribe to the $40/mo myFICO Ultimate service, which will show her true mortgage scores once per month.  The much more commonly available FICO 8 scores are not what mortgage lenders use.  Once she owns the home, she can cancel this subscription.

(2)  Pay one card to $0 and leave it there, and pay the other card to something small, like $10.  The remaining card needs to continue to report a small positive balance every month, e.g. $10-20.  You mention that she pays her cards in full each month.  Although one day FICO may be able to see that fact and reward it, it does not do that now.  Therefore all that FICO has to go on is the balance that reports to the three bureaus.

If her middle mortgage score gets above 740, she will be in perfect shape for the loan itself.  If she needs PMI, she will (ideally) want. a score above 760.

Remember, the scores I am referencing are the mortgage scores, not the FICO 8 scores she might get with her credit cards and not the scores she might get at any free website.

[Anonymous]

PS.  I just re-read your post and I see that the lender itself advises a score above 780 due to the fact that it is a jumbo loan.  In that case she definitely needs to do the two things I mentioned.

Do you happen to have any credit reports pulled on the same day as her latest scores?  If so, let us know the balance and credit limit of each card as it appears on the report.  If you do that, we can make a guess as to how much the CC paydown will help her scores.

Do you happen to know how old the youngest account is on her report?

Also, are there any inquries on her report that will be turning 1 year old in the next two months?

[Anonymous]

Not only is applying for new credit a huge no no prior to mortgage closing, the inquiry, reset of AoYA and the drop in AAoA would most certainly drop your score, not increase it, in the short term.

[Anonymous]

One last suggestion, pull her reports and look to see how all these recent inquiries are labeled inside the report.  If I understand you right, the inquiries were all for a mortgage.  You need to look carefully and make sure that each inquiry is of type "Mortgage."  If any of them are not, that will hurt her score.  That's because, if FICO sees a bunch of inquiries done in a very short period of time and are all of type Mortgage, then it will treat all those inquiries as a single inquiry.  To do that FICO assumes that they have been coded correctly as Mortgage on your reports.

Another thing that would help us is if you described the exact dates that all the inquiries were done.

As you can see, many of the questions we ask are based on the idea that you have her three reports in front of you and can get fresh updated ones pretty frequently.  That's really important.  Let us know if you don't know how to do that.