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Established Contributor
Posts: 542
Registered: ‎11-24-2016
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Card churning and mortgage reviews.

Eventually I'd be interested in churning cards to maximize rewards but I'm worried that lots of open and closed accounts looks bad under manual review when taking out a mortgage.


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Posts: 4,221
Registered: ‎07-17-2014
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Re: Card churning and mortgage reviews.

That's a great question.  A better forum might be the Mortgage forum.  This one is for discussions about the scoring models.  You are asking not about the model, but about how individual loan offiicers react upon seeing churning in a manual review. 

 

Lots of real loan officers visit the mortgage forum.

 

Also Google is great for these kinds of questions:

 

https://www.google.com/?gws_rd=ssl#q=does+credit+card+churning+hurt+mortgage?&spf=554

Regular Contributor
Posts: 141
Registered: ‎09-15-2016
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Re: Card churning and mortgage reviews.

Subexistence -

 

Leaving aside the possibility of manual review, why aren't you worried about the effects of lowering your average age of accounts (by opening new accounts wholesale) and inquiries on your mortgage FICO's?

 

A single point in mortgage FICO could put you below a cutoff that makes all the difference between qualifying for a loan at the time that a good deal is on the table or having to wait and losing the deal.  Or paying huge rate penalties (upfront or in monthly payments) versus not paying them.  Depending on the costs of housing in the area where you live, that may dwarf the potential gains from clever credit card churning....

Regular Contributor
Posts: 141
Registered: ‎09-15-2016
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Re: Card churning and mortgage reviews.

Unless, of course, you're not planning on applying for a mortgage for several years, at which time the accounts will have aged (and might possibly raise your average age of accounts) and the inquiries will be long gone from your reports ... 

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Senior Contributor
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Registered: ‎07-17-2014
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Re: Card churning and mortgage reviews.

Hi Sarek.  You wouldn't know this, but on other threads he's described his profile and his mortgage timeline more thoroughly.  His AAoA is already low (0.6) so he can't hurt it much right now.  And he isn't planning to buy a house for a number of years.

 

But of course you are right that he should lay off the churning maybe 12 months beforehand.  That way his inquiries will all be 12 months old and he'll add another 12 months to his AAoA.

Regular Contributor
Posts: 141
Registered: ‎09-15-2016
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Re: Card churning and mortgage reviews.

Hi CGID.

 

That makes perfect sense.

 

Opening a bunch of accounts now and keeping them open and current (for bonuses or any other purpose) will boost Subexistence's AAoA for years down the line and help blunt the negative impact of new accounts later.  So in my book an initial burst of churning at the begninning of one's credit history (let's say, over the course of the first year) is a net gain for mortgage scoring purposes too; and, arguably, the more the better -- so long as one is able to manage all of the accounts.

 

 

CGID, I definitely agree with your advice about holding off on churning for the last twelve months. On the other hand, insofar as a higher AAoA is obviously preferable from a scoring perspective, I would think long and hard before opening any unnecessary accounts thereafter to the extent that they would diminish my potential, optimal AAoA if my eyes were already on an eventual mortgage application.

 

I may be a bit biased by living in an area where housing is very expensive... having to pay extra points on a mortgage or being unable to close on time because of underwriting issues consitute major financial events where I live.  To other people in other situations the potential for credit card bonuses might be a more compelling opportunity.

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Posts: 542
Registered: ‎11-24-2016
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Re: Card churning and mortgage reviews.


CreditGuyInDixie wrote:

Hi Sarek.  You wouldn't know this, but on other threads he's described his profile and his mortgage timeline more thoroughly.  His AAoA is already low (0.6) so he can't hurt it much right now.  And he isn't planning to buy a house for a number of years.

 

But of course you are right that he should lay off the churning maybe 12 months beforehand.  That way his inquiries will all be 12 months old and he'll add another 12 months to his AAoA.


You know me so well lol. 


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Established Contributor
Posts: 542
Registered: ‎11-24-2016
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Re: Card churning and mortgage reviews.


Sarek wrote:

Hi CGID.

 

That makes perfect sense.

 

Opening a bunch of accounts now and keeping them open and current (for bonuses or any other purpose) will boost Subexistence's AAoA for years down the line and help blunt the negative impact of new accounts later.  So in my book an initial burst of churning at the begninning of one's credit history (let's say, over the course of the first year) is a net gain for mortgage scoring purposes too; and, arguably, the more the better -- so long as one is able to manage all of the accounts.

 

 

CGID, I definitely agree with your advice about holding off on churning for the last twelve months. On the other hand, insofar as a higher AAoA is obviously preferable from a scoring perspective, I would think long and hard before opening any unnecessary accounts thereafter to the extent that they would diminish my potential, optimal AAoA if my eyes were already on an eventual mortgage application.

 

I may be a bit biased by living in an area where housing is very expensive... having to pay extra points on a mortgage or being unable to close on time because of underwriting issues consitute major financial events where I live.  To other people in other situations the potential for credit card bonuses might be a more compelling opportunity.


In your case, does having lots of closed accounts look strange? Let's assume inquries are 1 year old and AAoA is taken out of consideration since my profile is going to be young regardless.


Starting Score: Ex08-732,Eq08-713,Tu08-717
Current Score:Ex08-719,Eq08-722,Tu08-717
Goal Score: Ex08-760,Eq08-760,Tu08-760


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Senior Contributor
Posts: 6,116
Registered: ‎04-11-2016
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Re: Card churning and mortgage reviews.

I honestly don't think upon a manual review that it would be looked at very adversely.  During a manual review they are trying looking to assess your risk factor.  Opening a bunch of accounts and closing them say 3-6 months later doesn't mean much, so long as the account is closed in good standing.  The lender doing the MR may even be able to make the determination that you were bonus chasing depending on the accounts they see; I'm sure they've seen this plenty of times in the past.  That said, to me, I wouldn't really think this would be seen as much of a risk so long as the accounts were paid as agreed and PIF without any crazy high reported balances/utilization.  Just my opinion.

Community Leader
Senior Contributor
Posts: 4,221
Registered: ‎07-17-2014

Re: Card churning and mortgage reviews.

Quick thought:

 

You are making an assumption here that is likely unwarranted.  Namely:

 

If I want to make a lot of money from CC promotional bonuses, that necessarily means having many closed accounts on my account. 

 

That is not so.  I can give you at least two reasons why:

 

(1)  There are often really nice promotions for cards with no annual fee.  For example, two months ago I picked up a $500 bonus from my Bank of America Merril-Lynch card -- and it has no annual fee.  Last year I opened four no-annual-fee BOA cards that had very low minimum spend ($500) and got $200 for each one.  There are many others: Chase often gives a very nice one for the Freedom.  Etc.  Often, if a card has no annual fee, there's no need to close it. 

 

(2)  There is often a nice downgrade path even when you have opened a card with an annual fee.  I will be downgrading my Chase Saphhire Preferred card to an no-AF Chase Saphhire later this year.  I downgraded my Citi Premiere last year. 

 

Of the nine cards I have opened since I started chasing CC bonsues, I have closed one of them.  And that was because Wells Fargo, the issuer, does not permit dongrades on any product.  Amex, Chase, Citi, etc. all do.

 

And finally, in my opinion, you shouldn't be churning regardless.  It's to soon to be jumping into something that aggressive.  You have extremely low minimum spend and its just a bad idea to jump into any radical credit udertaking right away.  If you like the idea, sure, find a new awesome card every 4-5 months.  That's different from hardened churners who are opening and closing dozens of cards a year.

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