Help or Hurt? - Super-Prime Opportunity

[Fandi]

Stats - Age: 24, 730 score, no derogatory accounts, 1 open installment, 2 Closed Installments, 4 revolving accounts carrying 4% debt to credit utilization ratio, average age of acocunt is 18-months. 

History: In August i had 100% debt to credit utilization ratio. This affected my score to 640. In the past 6 months I have paid my revolving credit down to my now standing at 4%. My score has in-return improved almost 100 points. My goal is to get above 780 in time to purchase a house next year. 

Heres my dilemma: Finance a sports car this summer and not tarnish my credit for next year's house purchase.

Question: Will the pay off of my current account (only open for 2 years), the addition of a new account (brings down my average account age), and the new inquiry all going to affect my score enough to not meet my 780 score goal and not be able to receive super-prime interest rates for a mortgage next year? 

I want to buy a Porsche! and this will probably be the best and only time for awhile to drive an awesome sports car for a summer. I am not rich and I wont be able to have both worlds and be able to buy a very comfortable nice home and drive a Porsche. That won't happen for some time. 

Here it is:

I currently have a vehicle financed for a 6.5 year loan with 2 years paid into the loan. Currently the balance is 68% of what I borrowed. I have 60% equity in the vehicle pending I sell it for retail value. 

Is it true that the FICO score doesn't have too much weight on the installment loan until it reaches 50%? It's what I have heard from some sources, that once it hits 50% the bureau hightens the score because of that. 

I want to purchase the Porsche financing 2x the true amount I need. Here are the numbers: Price of the car is $55,000, I have $30,000 in cash, and need financing for $25,000, financing a 4 year loan, which would be a payment just under $550. If I take out 2x the true amount I need, I will borrow $50,000 for a payment just above $1,000.

Within the first month to make the car payment, I will take that extra $25,000 I borrowed and pay against the loan's balance. That would automatically put my installment loan's balance at 50% of the original borrowed amount; which I hear FICO picks that up as being positive scoring value. This also sets me up to making a double payment for the year I will have the loan. In the end, by the time I am ready to purchase a house next year I will have built up more equity in the vehicle for a higher cash out when I sell it. 

Also, It will set me up to being able to handle what a mortgage payment will be once I get a house. 

Am I being too analytical and thinking it over too much? Or do I have something here that could potentially better my position. 

Or should I keep what I got, not take that awesome opportunity to own a cool car and keep paying my current installment which will then show 3 years on the bureau and by the time next year be at 50% of the original balance. 

Help me with any guidence! Thanks!

Fandi

[DallasLoanGuy]

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@Fandi wrote:

Stats - Age: 24, 730 score, no derogatory accounts, 1 open installment, 2 Closed Installments, 4 revolving accounts carrying 4% debt to credit utilization ratio, average age of acocunt is 18-months. 

History: In August i had 100% debt to credit utilization ratio. This affected my score to 640. In the past 6 months I have paid my revolving credit down to my now standing at 4%. My score has in-return improved almost 100 points. My goal is to get above 780 in time to purchase a house next year.  740 gets the same rate(price) ast 9 gagillion.

Heres my dilemma: Finance a sports car this summer and not tarnish my credit for next year's house purchase.

Question: Will the pay off of my current account (only open for 2 years), the addition of a new account (brings down my average account age), and the new inquiry all going to affect my score enough to not meet my 780 score goal and not be able to receive super-prime interest rates for a mortgage next year?   this is the mortgage forum.... not the credit forum...

I want to buy a Porsche! and this will probably be the best and only time for awhile to drive an awesome sports car for a summer. I am not rich and I wont be able to have both worlds and be able to buy a very comfortable nice home and drive a Porsche. That won't happen for some time.  so you are a poser?  <= i hope you dont catch the crabs....

Here it is:

I currently have a vehicle financed for a 6.5 year loan with 2 years paid into the loan. Currently the balance is 68% of what I borrowed. I have 60% equity in the vehicle pending I sell it for retail value. 

Is it true that the FICO score doesn't have too much weight on the installment loan until it reaches 50%? It's what I have heard from some sources, that once it hits 50% the bureau hightens the score because of that. 

I want to purchase the Porsche financing 2x the true amount I need. Here are the numbers: Price of the car is $55,000, I have $30,000 in cash, and need financing for $25,000, financing a 4 year loan, which would be a payment just under $550. If I take out 2x the true amount I need, I will borrow $50,000 for a payment just above $1,000.

hell...  i would like to finance 2x whatever i buy....   you might want to tuck that fico score between your legs and go back to driving your prius...

Within the first month to make the car payment, I will take that extra $25,000 I borrowed and pay against the loan's balance. That would automatically put my installment loan's balance at 50% of the original borrowed amount; which I hear FICO picks that up as being positive scoring value. <= FICO doesnt know your prowess.... you big stud...  This also sets me up to making a double payment for the year I will have the loan. In the end, by the time I am ready to purchase a house next year I will have built up more equity in the vehicle for a higher cash out when I sell it. 

Also, It will set me up to being able to handle what a mortgage payment will be once I get a house. 

Am I being too analytical and thinking it over too much? <= yer an idiot...  Or do I have something here that could potentially better my position. 

Or should I keep what I got(keep the prius), not take that awesome opportunity to own a cool car and keep paying my current installment which will then show 3 years on the bureau and by the time next year be at 50% of the original balance. 

Help me with any guidence! Thanks!

Fandi

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[Travis-84]

I don't think it will have a huge effect.

Several things to consider:  If you go through with this plan, will you have money for a downpayment on a house?  If you go through with this and save a few bucks on your interest rate, but now have to pay PMI because your house down payment was smaller, then you may not be saving any money.

One factor in getting a approved for a loan is Debt to Income.  Depending on what your income is, a 1,000 a month obligation might make it harder to fall into an acceptable debt to income ratio and get approved for a mortgage.  (Although if you are a year ahead on payments, that would help a bit with manual underwriting.)

If you are looking to buy a house within a year, unless you are planning on buying a very modest house for your income, I think you are better off not buying the porche.  Without that payment over your head, and with more money for a down payment you will be able to buy a nicer house is one comes along that you like. 

[mynameainttracy]

I agree with Dallas 100%, but if you just want to drive a "cool car" for the summer why don't you just lease one?

[SantanzChild]

At 24 I would make sure I could afford the insurance to drive a porche before I did anything else. It could easily be another few hundred a month at that age.

[tooleman694]

My question would be, what is your income and how much of a home are you thinking about financing.

If your single, making 6 figures and want a 400k house.. Go buy the car, but id keep some of the cash for the down payment on the house.

[juggalo9er]

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@DallasLoanGuy wrote:

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@Fandi wrote:

Stats - Age: 24, 730 score, no derogatory accounts, 1 open installment, 2 Closed Installments, 4 revolving accounts carrying 4% debt to credit utilization ratio, average age of acocunt is 18-months. 

History: In August i had 100% debt to credit utilization ratio. This affected my score to 640. In the past 6 months I have paid my revolving credit down to my now standing at 4%. My score has in-return improved almost 100 points. My goal is to get above 780 in time to purchase a house next year.  740 gets the same rate(price) ast 9 gagillion.

Heres my dilemma: Finance a sports car this summer and not tarnish my credit for next year's house purchase.

Question: Will the pay off of my current account (only open for 2 years), the addition of a new account (brings down my average account age), and the new inquiry all going to affect my score enough to not meet my 780 score goal and not be able to receive super-prime interest rates for a mortgage next year?   this is the mortgage forum.... not the credit forum...

I want to buy a Porsche! and this will probably be the best and only time for awhile to drive an awesome sports car for a summer. I am not rich and I wont be able to have both worlds and be able to buy a very comfortable nice home and drive a Porsche. That won't happen for some time.  so you are a poser?  <= i hope you dont catch the crabs....

Here it is:

I currently have a vehicle financed for a 6.5 year loan with 2 years paid into the loan. Currently the balance is 68% of what I borrowed. I have 60% equity in the vehicle pending I sell it for retail value. 

Is it true that the FICO score doesn't have too much weight on the installment loan until it reaches 50%? It's what I have heard from some sources, that once it hits 50% the bureau hightens the score because of that. 

I want to purchase the Porsche financing 2x the true amount I need. Here are the numbers: Price of the car is $55,000, I have $30,000 in cash, and need financing for $25,000, financing a 4 year loan, which would be a payment just under $550. If I take out 2x the true amount I need, I will borrow $50,000 for a payment just above $1,000.

hell...  i would like to finance 2x whatever i buy....   you might want to tuck that fico score between your legs and go back to driving your prius...

Within the first month to make the car payment, I will take that extra $25,000 I borrowed and pay against the loan's balance. That would automatically put my installment loan's balance at 50% of the original borrowed amount; which I hear FICO picks that up as being positive scoring value. <= FICO doesnt know your prowess.... you big stud...  This also sets me up to making a double payment for the year I will have the loan. In the end, by the time I am ready to purchase a house next year I will have built up more equity in the vehicle for a higher cash out when I sell it. 

Also, It will set me up to being able to handle what a mortgage payment will be once I get a house. 

Am I being too analytical and thinking it over too much? <= yer an idiot...  Or do I have something here that could potentially better my position. 

Or should I keep what I got(keep the prius), not take that awesome opportunity to own a cool car and keep paying my current installment which will then show 3 years on the bureau and by the time next year be at 50% of the original balance. 

Help me with any guidence! Thanks!

Fandi

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lol +1

[Fandi]

Much of my cash is held up in the car I currenty drive. I just planned on moving that cash over from the sell on my current car over to the Porsche. Insurance on my current car will stay the same for the Porsche. My gross income is $60,000. My current dti is 9% with my current car payment at $418/mo.

Just wanted to know if purchasing a new installment loan will hurt my credit, and drop my score low enough to not get the best rates available. and if it does, are there are any techniques to better the credit. 

[ezdriver]

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@Fandi wrote:

Stats - Age: 24, 730 score, no derogatory accounts, 1 open installment, 2 Closed Installments, 4 revolving accounts carrying 4% debt to credit utilization ratio, average age of acocunt is 18-months. 

History: In August i had 100% debt to credit utilization ratio. This affected my score to 640. In the past 6 months I have paid my revolving credit down to my now standing at 4%. My score has in-return improved almost 100 points. My goal is to get above 780 in time to purchase a house next year. 

Heres my dilemma: Finance a sports car this summer and not tarnish my credit for next year's house purchase.

Question: Will the pay off of my current account (only open for 2 years), the addition of a new account (brings down my average account age), and the new inquiry all going to affect my score enough to not meet my 780 score goal and not be able to receive super-prime interest rates for a mortgage next year? 

I want to buy a Porsche! and this will probably be the best and only time for awhile to drive an awesome sports car for a summer. I am not rich and I wont be able to have both worlds and be able to buy a very comfortable nice home and drive a Porsche. That won't happen for some time. 

Here it is:

I currently have a vehicle financed for a 6.5 year loan with 2 years paid into the loan. Currently the balance is 68% of what I borrowed. I have 60% equity in the vehicle pending I sell it for retail value. 

Is it true that the FICO score doesn't have too much weight on the installment loan until it reaches 50%? It's what I have heard from some sources, that once it hits 50% the bureau hightens the score because of that. 

I want to purchase the Porsche financing 2x the true amount I need. Here are the numbers: Price of the car is $55,000, I have $30,000 in cash, and need financing for $25,000, financing a 4 year loan, which would be a payment just under $550. If I take out 2x the true amount I need, I will borrow $50,000 for a payment just above $1,000.

Within the first month to make the car payment, I will take that extra $25,000 I borrowed and pay against the loan's balance. That would automatically put my installment loan's balance at 50% of the original borrowed amount; which I hear FICO picks that up as being positive scoring value. This also sets me up to making a double payment for the year I will have the loan. In the end, by the time I am ready to purchase a house next year I will have built up more equity in the vehicle for a higher cash out when I sell it. 

Also, It will set me up to being able to handle what a mortgage payment will be once I get a house. 

Am I being too analytical and thinking it over too much? Or do I have something here that could potentially better my position. 

Or should I keep what I got, not take that awesome opportunity to own a cool car and keep paying my current installment which will then show 3 years on the bureau and by the time next year be at 50% of the original balance. 

Help me with any guidence! Thanks!

Fandi

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That is the most hilarious piece of financial analysis that I've seen in a long time. I say go do it.

[tooleman694]

60k a year I would not be buying that car. Id be looking for sports cars in the 30k range.