A question about the short term effect of an motorcycle loan on my FICO scores...

Anonymous — Thu, 27 May 2010 05:38:19 GMT

OK- here's the thing... I want to get a home loan later this year- probably in Late November / Early December 2010. My current credit situation is this- FICOs are 682 Equifax, 680 Transunion. (EXP should be about the same because the information on all 3 reports is about the same.) I have 5 revolving accounts- 4 credit cards ( Hooters 400.00,Wells Fargo CC 2K, Mor Furniture ( Wells Fargo Financial ) 3800.00, US Bank Platinum Rewards 3500.00 ) and a 1K reserve line from US Bank totaling 10,700.00. My current total owed on those 5 accounts is 1,300.00, or about 12%. I have been paying them down over the last few months in 500.00 chunks every non-rent check, and plan to have it under 500.00 owed total by next month. I have 2 1/2 years on the job ( 45K a year ), I'm single with no kids, and I have been almost 2 years at my current residence. My FICOs are gradually rising, and I think I will have enough for a down payment by December, so everything looks to be generally on track for home ownership with an FHA loan and a decent interest rate in about 6 months if I maintain the current course I am on. BUT here's my question... IF I were to get a 15K auto loan ( motorcycle actually ) in July or so, what would the effect be on my FICO scores between then and December? That's assuming I paid every month on time on that loan- which I would definitly do. Based on what I have read, there are a lot of factors involved with getting an auto/motorcycle loan that would add both negatives and positives to my scores. Payment history is supposedly about 35% of FICO score, so with 5 on-time payments between July and December, that would be a positive, but then again, NEW credit would negatively affect my average age of accounts which would be a negative. Which factor outweighs the other? 30% of FICO score is supposed to be based on the amount owed on credit lines. Now, obviously this factor would be a negative, as I would owe 15K out of 26K total available credit if I get the motorcycle loan ( 57% ) as opposed to owing 1K out of about 10K now ( 10% ). I am also given to understand that 10% of FICO is about how many TYPES of credit I have. Now currently, all I have is revolving credit, and so an auto loan - especially one that is paid on time every month- would be a positive in that regard but does that plus a few on-time payments outweigh the higher debt and the younger average age of accounts?. Does it all add up to a negative or a positive in the short term ( about 6 months )? It sounds to me like a net negative, and that my FICO score might be lowered signifigantly by getting the Motorcycle loan in July and would probably not fully recover by December. Would you all agree with that assesment? If I were to get the motorcycle in July, would I be wrecking my chances to get a home in December ? Am I going to lower my FICOS to the point where I would get a crappy rate on a mortage, or even maybe not get approved at all? Should I just stay focused on the home and forget the motorcycle? Normally I would say yes to that, but it's kindof a unique situation- you see they stopped making the color I want for this particular bike in 2008, and now there is literally only one left in the entire country in that color- yes I actually called every dealership in America that sells this brand of italian bike. Even though the bike is still brand new and has zero miles on it, I would be getting 3,000.00 off MSRP because of the model year. Also, they don't make the 1098 anymore, and so if I wait until afterthis last one is sold, I would then have to get the 1198 model which is going to wind up being about 4K more than a 2-year-old 1098. Also, I would have to spend about 3K more on a tank and covers to get it to the color I want. So bottom line is that getting this bike now would be a real steal and would save me a lot of money in the long run. I also want the bike badly, BUT if I have to choose between the bike in July and getting a home loan in December when my lease is up ( and at a decent interest rate ) I would have to choose the home loan. That's much more important to me in the long run, and I don't want to wait a year or longer to buy the home because interest rates are going up, and so are home prices. The home market here in phoenix is about as good as it's ever going to be... So what do you people think? Can I have my cake and eat it too, or do I need to choose.....Any advice would be really appreciated!!!

Re: A question about the short term effect of an motorcycle loan on my FICO scores...

Anonymous — Thu, 27 May 2010 07:12:40 GMT

My opinion? Choose one or the other. Personally, I'd work towards the home...you can always get a bike afterwards, if you still want it.

Just want to point out that if you meet that "special someone", the bike is gonna go anyways. (Been there, done that).

Good luck with everything!

Re: A question about the short term effect of an motorcycle loan on my FICO scores...

Anonymous — Thu, 27 May 2010 12:48:16 GMT

I personally say go for it for the following reasons:

You have no installment accounts so you are going to get an instant boost there. That will help offset the new account partially. It will look good showing them you can manage an installment account as well.

If this is your last shot at that bike and you know you can never get it again then thats a big factor.

Overall with all factors you may lose a few points but I dont think you will lose enough points to qualify for a mortgage.

Not to mention once you get your credit cards payed down further you will gain points there and with the 6 months of positive history on all your accounts I honestly cant see you really losing any points.

The only other factor to look at is your debt to income ratio. How much do you make and how much do all of your bills run a month. Factor it without the motorcycle payment and then with. Can your income support the motorcycle and mortgage? That is one thing mortgage lenders look at in their decisions.

So if your income can support it go get your cake.

Re: A question about the short term effect of an motorcycle loan on my FICO scores...

Txmomof3 — Thu, 27 May 2010 16:10:01 GMT

My husband has a 08' 1098 and he loves his bike...it is oh so very beautiful! I totally understand why you want it so badly and I remember my husband feining in the same way before he got his

Anyway I say go for the bike loan. You have no installment loans right now so I think it would actually help your score. I recently took out an out loan after having only student loans on my report and when it first reported my score jumped 20 points and now each month that a payment reports it jumps another 7-8 points.

topic Re: A question about the short term effect of an motorcycle loan on my FICO scores... in Auto Loans

A question about the short term effect of an motorcycle loan on my FICO scores...

Re: A question about the short term effect of an motorcycle loan on my FICO scores...

Re: A question about the short term effect of an motorcycle loan on my FICO scores...

Re: A question about the short term effect of an motorcycle loan on my FICO scores...