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Hi Everyone - My goal is to purchase a home in 01/2011
Score would have been 654
I recently had a collection added to my account. My score dropped 36 points to 618 (I have written a PFD to collections agency, mailed yesterday)
Overview of my current credit situation:
I only have 2 credit accounts (never late on either)
**** 1 jewelry account that is $0/$810 (opened 12/2007)
**** 1 credit card that is $792/$800 (opened 06/2007)
I know my utilization is 49.12% - I will be paying my card down to 0%-9%
Three Inquiries
December 18, 2008 Cme Cu October 20, 2008 First Usa September 11, 2008 Fusa, Na
Question is - What would you do?
Scenario 1: payoff credit card to 0%-9%, no inquires, keep the reporting usage on card below 9%
Scenario 2: Open acct at credit union, open $1000 cd, open a secured installment loan, use the funds to payoff credit card and payoff the installment loan over 6 months.
Scenario 3: payoff credit card to 0%-9%, no inquires, keep the reporting usage on card below 9%, after x months, apply for new credit card
What do you guys think?
Also, if I decide to apply for a new credit card (after the pfd for collections and paying off my current card), what behavior do I need to demonstrate to increase my chances of being approved?
...light use of card and paying off in full?
...how long should I wait? 6 months?
...any other thoughts before I do anything?
I'd pay that cc down to the 9% area & then I'd call them & ask for a CLI.. Let them know that you're working on your overall credit & that you know a higher limit would help. (maybe after the card has been paid down for 3 or 3 mos).
As far as a loan, go to your bank. If you have a fairly long history with them it will help. Don't go to the counter, ask to see a loan (or mortgage) specialist. Let them know your long term goal and what would "they" advise. Do they think a persoanl loan would be available for you? "Oh, no...well, what about a secured loan"?
Or if they say yes to pers. loan but the Int is too high, ask about securing half or something. (or all if need be) I wouldn't offer up my cash right away. Let them turn down your first choice, then go to next available.
Any other ideas out there folks???
Thanks for the reply Bungalow!
I know either way my util. needs to come down. The only reason why I'm opting for a cd secured loan is because it's only 2% above the cd rate and I think it may help my credit mix (since i only have credit cards/store accounts) now.
I'd pay that CC down and not app for anything. You can hit the high 700s with the mix you currently have. Since a higher score is your goal, I assume, you may want to focus on your history. Adding any new TLs will hurt your AAoA.
Currently your AAoA reads 1 year. In another month and a half, it will hit 2 yrs and you may see a score bump. Your AAoA is actually over 1 yr 10 months, but FICO rounds down to a whole number. If you add a new TL this month (e.g. a loan), your AAoA will drop to 1 yr and 3 months. If age is the only thing that can help, you go backwards by 7 months.
IMO, the impact of an installment loan to your mix is sooooo minor it isn't worth getting. Installment accts only count if open. My last installment account was just paid off. My EQ increased 7 points and TU dropped 5 points. In other words, it hurt EQ and helped TU.
DV the CA, even after sending the PFD.
Are the two cc's the only TL's you have or the only open TL's? It is really going to depend on what type of mortgage you plan to apply for next year. If you are looking at a gov't backed loan, such as FHA, VA, or USDA then you will be fine. If you are looking at a conventional mortgage then you would probably want to consider having 2 additional TL's on your report.
I would also go over to the mortgage forum and do some research.
Thanks for the replies guys. My only 2 tradelines are the credit card and the jewelry acct. Thanks for the info about the AAoA, I didn't think of that!
I think I will wait for a response regarding the PFD, paydown my card to 9% or less, and apply for a CLI once im above a 720 - which according to the calculator @ Bankrate (http://www.bankrate.com/calculators/credit-score-fico-calculator.aspx), I could be @ a 735 by the end of the year assuming my card is payed off and my collection item is removed!
UPDATE!!!!
I've had the collections removed from my report!
My score has gone from:
555 in November 2008
705 as of today (purchased from myfico)
Thanks to all of you for your help and advice!
I currently have 2 open TL's
$334/$800 student card
$0/$810 Jewelry Card
Both accounts are 2 years old...
I plan on paying balance so that it reports 1%
Ill be applying for a mortgage within a week or so!
wish me luck!