Will getting a new CC help my low fico?

[Anonymous]

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@Anonymous wrote:

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@jarmll wrote:

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@StartingOver10 wrote:

Yes, jarmil, it will help.  Read the stories here on the boards. Building or Rebuilding your score is two things:  repairing the 'baddies' and showing good on time payments on open credit cards and installment loans.  Do you have any open tradelines now or will this next credit card be your first card? 

Here is a thread (below) that I first read when I got here and I found it very inspirational.  He started where you are now. Read it. I hope you find it inspirational too:

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/CREDIT-REBUILD-PROJECT-LOG/td-p/290152

Thanks for the quick reply. I currently have no open credit cards, but I do have a couple old bad lines that need to be addressed.

When trying to clean up old CC like Merrick, Cap One, PayPal, does it matter if you settle with them? They are all in collections agencies now and have been for a while.

I did skim some of that thread, LOTS of details! but watching the updates as the scores moved higher was pretty awesome.

In the short term my goal is to get up into the 600-620 range to buy a car with no cosigner. From there I would like to move as high as possible. I am really not interested in buying a house. I see them purely as money pits. With homeowners insurance and Kansas property taxes you never truly own it anyhow. I know a guy that bought a house for $150k, had $75k down and his payments are still around $900 because taxes are $250/mo and HOI is $200/mo. So even after he pays the house off he still owes someone $450/mo forever??? How is that an incentive to buy? I would rather rent for $800/mo and not have the added stress of stuff going wrong.

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Thats a relatively high property tax, but the the HOI! Is he in a flood plain or something? Thats ridiculous for HOI - mine is a little over $30 per month on a $140K home. No matter where you live you are going to pay property tax. Some cities/counties are higher than others. Most are around 1% annually. Once a home is paid for you are no longer required to carry HOI on it.

Heres the thing about renting vs buying from my perspective. You have to think long term. If you are young this may not be apparent, but rents ALWAYS RISE. 30 years ago I could rent a place for $200-$300 a month. That same place today would rent for upwards of $1k-$1.5k. So by purchasing a home you are basically "locking" your housing cost for the next 30 years, after which it will drop. While you will still have property tax, you will now have a ton of equity - which can essentially be sold back to the bank in the form of a reverse mortgage - essentially eliminating your housing cost entirely during your retirement years and paying you a monthly sum to boot. Do you know any renter thats going to stop charging you rent when you retire, and start sending you a monthly check? Just something for you to think about.

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J. Paul Getty wrote in his book "Being Rich" that to gain wealth one should buy things that appreciate in value, and rent things that depreciate. Americans tend to do just the opposite - we buy our cars, which depreciate as soon as we drive them off the lot, and we rent our homes, which appreciate as we make the property owners mortgage payments for them.

[jarmll]

He has an older house (1930s) in a very nice area of town. Median home prices in our city are closer to $70k last I checked. Perhaps buying a new build is the best way to go so you avoid most repairs in the first 10+ years of ownership (I would assume).

Went to Cap One and they prequalified me for a $20k car. We are thinking about trading in our paid off car ($5-6k trade in value) and making the low payments for a 60 mo loan and a fresh start on a new car. Then refinancing in 12 months with a better rate.  

Just trying to think.

[Anonymous]

Just my two cents ... If you need a new car, sure, borrowing for a new car makes sense. If you don't, I would advise against it, because owning a car, as you know, is more than just paying the car payment. You'll pay more for insurance on a new car, etc. 

But you're going to accomplish more (score increase wise), and at a cheaper price, by having two positive bank card tradelines (secured or not), as well as a store card. In addition, you can do a secured loan to establish a loan account that will also help your FICO. Plus then you could have the benefit of using the secured loan funds as a down payment on your car at a later date. 

[Anonymous]

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@jarmll wrote:

He has an older house (1930s) in a very nice area of town. Median home prices in our city are closer to $70k last I checked. Perhaps buying a new build is the best way to go so you avoid most repairs in the first 10+ years of ownership (I would assume).

Went to Cap One and they prequalified me for a $20k car. We are thinking about trading in our paid off car ($5-6k trade in value) and making the low payments for a 60 mo loan and a fresh start on a new car. Then refinancing in 12 months with a better rate.  

Just trying to think.

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I agree with jjking54 - don't finance a car unless you NEED a car NOW. You're going to get a horrid interest rate with sub-600 scores - 15-20 percent. Instead, start putting aside money that would go towards a car payment to use for maintenance costs on the current vehicle, and once you have rehabbed your scores and break into the 700's, look into leasing a car instead of purchasing.

Use the small secured loan strategy to boost your scores in the meantime (unless you have student loans).