Approved on New Mortgage (2nd home) car purchase

[Anonymous]

HI everybody,

We have just received our underwriting approval on our new home, closing in 2 weeks. One of the conditions is that we close our oldest credit card (0 bal). We know this will hurt our credit. We were planning on buying a new vehicle once we close. Can anybody help me with iinformation:

How much will it hurt our credit score with closing our oldest account (13,000 credit line)

Will we be able to get a new car loan within the next month or so?

Thanks for any info you may be able to provide!

We are keeping our first home and renting it out. 

[llecs]

Welcome to the forums!

Do you have any other cards reporting? What is your utilization on those other cards (aside from this one)?

After you close, you can always try for a car.

[CreditBob]

Why did they want you to close down your oldest credit card?

How many other credit cards do you have? Including your oldest card, what are the account ages of all your cards?

If you have access to what is considered, too much credit, then creditors can possibly require that you close some down.

I have an idea, ask the mortgage company if they will allow you to have the line of credit lowered from $ 13, 000 down to $ 500 - $ 1,000. Let them know that closing the oldest credit card would possibly have a negative impact on your credit score. Give it a try. If that does not work ask them if they would allow you to close down older accounts.

[Anonymous]

Yes, we have others reporting, everything is in excellent standing, no marks on our credit reports at all. We were about 30% utilization on them, and then some started lowing our credit lines, so they fluctuate. They lower the credit line, then increase it. We pay off a big chunk, they decrease the line by how much we paid off, it's a continuous game. We are fortunate that we have always been able to pay big payments on them. 

[Anonymous]

I'm assuming that they don't want us to have the spending power of that open credit line?  My loan officer said she has never seen this happen before.  I'm just afraid of rocking the boat with the underwriter, I feel like we are at her mercy....

[Booner72]

Hi, Yogi - well obviously you will have to do it if the UW says, but this is worth some consideration before you do this.  it sounds like your accounts are "balance chasing" you by cutting down your limits.  So if you get rid of this 13K limit, you will probably be maxed out (Maybe not?) - anyway, there goes your FICO score in terms of your utilization, which is 35% of your score.

Since you have excellent FICO payment history, your score will still be passable, but you will definitely lose some serious pointage.

Does your underwriter not understand this?  Probably not,  Not many people do.  But a mortgage underwriter SHOULD.

You could compose a little letter to the UW explaining what could happen if you closed this card.  Have that UW guarantee that she/he will still fund the loan if your score goes down from this closing of the card.  I agree that taking the limit down is a MUCH wiser decision, but still not the best.

[gpeach]

You are right to question this as it will negatively affect you. You should ask their supervisor on this one.

Amazes me how many loan officers don't seem understand basic credit building knowledge. We had a great local loan officer a few years back. But some of the advice she gave us to improve our credit was backwards. Had we listened we would have done damage affecting us for years. 

Second best situation is just like others said having your limit lowered to 500.00. But still that will increase your utilization and still lower your score. 

[llecs]

OP, if you do close it, close it as late as possible. Most CCs won't update until the statement date. If you can postpone closing it until after the statement date, then do so and you'd buy yourself a month of time before that card reflects on your CR. I'd also talk to the lender and try to get them to NOT do a rapid rescore on that card to confirm that it was closed. You can always provide a screen shot of the card showing that it was closed without it impacting your credit.

I'd also call the CC and ask them if you close the card, can they reopen it given a month or two after closing it. Maybe you can reopen it and be on good terms.

If your util is at 30% with the card, then obviously your util will spike up and your score can drop...

Got to thinking...closed CCs with a balance still factor into utilization. If you can get away with it, charge a hundred or so and if you had to close it, then there'll be no impact if they did do a rescore to confirm that it is closed. But talk with your lender.

[CS800]

I have heard that before where the UW asks you to close one or more credit cards even though they have 0 balance.

If tha'ts your oldest with a CL of 13000, that might affect your AAoA and your overall util % since FICO counts this as 30% of your score you might take a good hit in the scores

Do the loan companies understand FICO scoring? Am i the only one who finds this ridiculous?