High limit cards are a red herring when we're just talking FICO: you can always manage your balances to have them report prettily and max out that portion of the scorecard.
The lender is presumably UW on the typical FICO 5,4,2 trifecta (EQ, TU, EX respectively), I don't know that a 740 is feasible with a BK on there at all from where she's at currently: I couldn't get above 740 on those (barely broke 730 on two of them) when I was zealously clean with a tax lien on my reports; I only just now got to 742 on EX 2 with the tax lien's removal when I'd started building 4 years ago at that point, and my EQ score sucks hard.
Also installment loan doesn't do much for the mortgage trifecta; does she still have a open mortgage? Actually does she have any open tradelines at all?
The biggest mistake people with a BK or other nasty event make (my tax liens, what I wouldn't give to go back to 2005 or earlier and establish a couple credit cards that I kept), is they don't go out and open any awful couple of cards they can right after the BK... getting back to good credit is not only about the BK aging, it's about establishing positive tradelines again too and getting that all aging together. BK + 8 years of positive history looks much better than BK + burying head in the sand from a FICO perspective.
So I don't know if it's in the cards right now, or she may need to simply wait 2 years or come up with a bigger downpayment... investment / second homes typically have more stringent UW requirements.
Without knowing what's on her file today (closed accounts do still factor while they're on there but they're on a 2ish year window too) would be helpful in recommending an explicit path, but just be warned it might not come up roses.... but she's going to get obliterated at the 2 year mark when all that old history disappears if she hasn't gotten anything else setup.
@Anonymous wrote:She does have several open bank cards and possibly store cards as well, and an active mortgage. No lates on anything. So she has been working at developing positive tradelines.
I hadn't experienced BK so I really had no idea that they continued to weigh that heavily for so long.
Yeah BK's and tax liens are supposed to suck unfortunately. FICO 8 changed some of that but mortgages are underwritten on the older models and there I'm pretty confident in saying they last all the way through.
If she's got several open bank cards and an active mortgage, her only options are to pretty up her revolving balances and see if she can get any of the old negative information off... don't have her open up more accounts as that's not going to improve her standing vs. fixing the revolving utilization issue if any. Mortgage will count for installment purposes anyway.
Alternatively have her start talking to other lenders; lots of fish in the sea, and she might do better with a specialized lender, hard to say. Mortgage board would be better for that question in terms of options for second home purchase, I don't know how common the 740 line is for all lenders, it might be 700 or 720 in which case she can win.
Am sorry I don't have anything better for her.
@Anonymous wrote:So I recently starting sharing my FICO wisdom with a friend. She has a few cards, but has been reluctant to app for a variety of good reasons -- had a bankruptcy about 8 years ago; afraid to build credit again in case it gets abused; worried about score from inquiries, etc. But she's looking to purchase a second property and lender wants her at 740 to qualify. She's currently at 720. No other baddies on file at all. A mortgage, a few cards, low utilization, and no car or other personal loans. She's also looking to build up a bigger credit profile to more easily absorb some upcoming work-related travel, as her company takes a while to reimburse.
My advice was as follows:
* She already has a PenFed account, look to them to open some sort of installment loan as well as a credit card, hopefully she'll get the points she needs from that. Other than that, I can't imagine what else is holding her down. Does and 8-year-old bankruptcy really carry that much weight?
* As far as building a profile, I send her prequal links for Cap One, AmEx and Discover. I think at 720 with such an old bankruptcy, she's likely to get in with some healthy limits, possibly on all three.
My question is, do you think she's stuck in that range until the full 10 years and the BK ages out? What would the max, all else being perfect, with a BK that old?
Also if anyone has any other thoughts, either on improving her scores or on BK friendly high limit cards, we're all ears.
1. Are you sure you're looking at her mortgage scores (EQ FICO 5, TU FICO 4, EX FICO 2), as opposed to her FICO 8 scores?
2. Yes an 8 year old bankruptcy has an enormous effect on all of her scores.
3. Prior to applying for a mortgage is not the time to build a bigger credit profile. This is the time to chill out on any inquiries or new accounts, as the passage of time + no inquiries + no new accounts = point gain.
4. My recommendation would be to postpone getting another mortgage until after the bankruptcy falls off.
@Anonymous wrote:She does have several open bank cards and possibly store cards as well, and an active mortgage. No lates on anything. So she has been working at developing positive tradelines.
I hadn't experienced BK so I really had no idea that they continued to weigh that heavily for so long.
Yes, the impact continues for the life of the negative mark, but lessens over time.
It is hard to say what the max score is/can be, but I will share my personal experience with you. I files BK7 in early '07, have no clue how far FICO fell. I had a few open students loans that I remained current on, and in '08 was able to get a non-secured VISA card. Didn't do much else until late '13, when I was approved for Discover It. Discover reported TU score as 749.
I added quite a few cards over the next year and a half. My scores range from 722 EX to 765 EQ. So yes, it is possible to hit 740, but as always, YMMV depending upon the length/number of accts and other factors.
Best advice is to continue to pay everything on time, no new apps, and monitor score for fluctuations. Based upon the limited info available it is hard to tell how high scores can go w/BK still on but there should be, at least, modest improvement.
