Choice to Make - Helpful input?

[Svnh]

Hello,

This is my first time posting, though I have been reading for a few days now.    My credit scores are currently in this ballpark:

TU - 580 on 8/1

EQ - 645

EX - 580

I'm not sure why Equifax is so much higher than the rest, but my situation is as follows:

I've been working with a mortgage broker for pre-approval, and recently (just at one month) I paid off 4 of 6 negative items on my credit report.    2 small ones ($500 each) still remain.

I currently have a secured installment loan with payment of $152 per month as well as I am an authorized user on one credit card with a credit limit of $2500 with only like ever being $100 used on it.  Both are relatively new, and the scores above are AFTER the new accounts hit and affected the score however it was going to.

I was told yesterday to let everything ride, and he would pull my credit reports again at the beginning of September, and that would give the best chance of all 3 scores being over 640 in order to finance a home.    

Issue - This evening the car that I was nursing along decided it no longer wanted to be nursed, and stopped in the middle of the road, to never start again.    After the tow truck brought me home, I sit here wondering what to do.    I only work about 10 blocks from my home, and I have no family or little kids, so I simply need a car that is dependable without being expensive.    I have no real alternatives cash-wise at this moment, as I pretty much strapped myself to get my credit report cleaned up (and of course, it would occur right now).      I'd seriously just walk to work for a couple months if there weren't some questionably unsafe areas in those 10 blocks between myself and work, and/or if I didn't work until 10 pm at night.    But it's just not wise.   

My question...    broker said don't open any new accounts, but having no real options here, how bad will I be screwing myself if I go get a very small car loan?    There are several places here in town that have cheaper cars, maybe $4000-$5000.....and I'd think the loan payment would be under $200 probably.   So thoughts on this choice as soon as possible would be greatly appreciated right now.     I am going to have to decide relatively quickly.

Thank you in advance -

K.Lyn

[DaBears]

Hi Svnh and welcome to the forums!!!! I would listen to the loan officer. When the under writer looks at your new credit reports he will question you and can pull the loan. Rule of thumb is to never apply for credit or loans within 6 months of apping for a mortgage. One reason is Banks have been known to pull mortgages when the homebuyer buys a new car or makes another major purchase. To banks, such purchases suggest more debt for the homebuyer and more risk for the banks.

Paid collections are scored the same as unpaid collections. What is your current util% on the cards? very important to know. Getting to that 640 mark is cutting it close. 

Community Leader, 

DaBears

[RobertEG]

Seems as if it might be best to delay the morrtgage app until things settle down?

If an auto loan is a priority, then it will most likely involve a hard pull to secure, and will lower your AAoA if approved.

And the additional monthly payment may also affect your debt to income ratio with the mortage lendor, which is apart from FICO scoring issues.

I would talk to the mortgage lendor first, and get his/her view on impacts on their approval process.....

[mygoal750]

First of all, my sympathy in your situation.   Do you have any other options for transportation...riding with a co-worker (paying them a stipend) or renting a cheap car or borrowing a car from family or friends?  how is your public transportation?  I've done all of these when I was in your situation.  I know it will be hard, but it would be best for your mortgage chances not to get a car.  Now, you need to determine how important is getting a house to you, at this time.  If you go with a car loan, you'd have to wait on the house probably 6 to 9 months.  If you decide to tough it out and get the mortgage, it would probably be 60 days before you could buy a car (after the loan closes).  You've made great progress so far, so don't get discouraged.  Hang in there, and think about this long & hard, as it will impact your finances for years to come.

[Svnh]

The good news....I was at work this evening, pondering as I worked, and pondering some more.   Then my daughter texted and asked to stop by for a minute, and showed me a photo of a little affordable car that she had not only gone out and found for me while I was gone, but also purchased for me as an early birthday present.     We just picked it up.....she's a dear.   I didn't want her to do something like that, but she said that is the reason that she didn't tell me she was doing it until it was done.   

So, the auto loan is not a question any longer, and I will continue to just watch my credit score creep up.    Thank you for the great advice.   I'm not sure what util% is, but I assume it's utilization of my available credit.     I have 94% of credit available, so I don't know if that part would have hit me too hard.  I do agree with what everyone said though.   

Here's a question that maybe someone knows the answer to.    I know that credit score increases and decreases are based upon many factors, but I was curious about something that I haven't come across any topics on yet.        If you have a new account....say, an installment loan.    You take it out new, and you owe maybe 3000.    You get hit for the new account, hit again for the credit pull, but then you make your first payment a month later, and it gets reported to the bureas.      I know that a late pay affects your score negatively, but does that on-time payment improve anything?   Like even 2-3 points?   

Does the new account begin to age out a little after the first month...and a little more each month and improve your score even by a little starting at 30 days out?

[Shogun]

You get no "credit" for making on time payments.  That is what expected of you.  You do get credit for the age of the account and also for diversification of accounts..  Example,  Auto, mortgage, revolving.

You get "dinged" on your AAoA for a new account, takes 6 months or a year for you to get that back, unless you have a really thin file, then you can actually see a bump.  But that "ding" is necessary to thicken your file and make you look more creditworthy.

BTW...  How nice of your daughter!!!  

[rd2rebuilding]

your score will take a hit for the hard inquiry and the decrease in aaoa that the new account will cause. installment loans only account for 10% of fico scoring, so unless you don't have any installments reporting, then it is not going to having the positive effect on your score for which you hope, espcially just after a month. It will take months of on-time payments coupled with the account aging (increasing aaoa) to have an effect (and that would be minimal).