topic Re: When to apply? How do they decide if you get approved or denied? in Credit Cards

When to apply? How do they decide if you get approved or denied?

ccubedzx3 — Thu, 28 Feb 2013 12:41:28 GMT

Good morning all,

Hoping you can help me out. In December in 2011, our situation was a mess. We had $275,000 in debt, including our house, and had a few accounts that were past due. At the time we had the following accounts open and reporting to credit agencies, along with the current status at the time-

Mortgage- $143,000- $1375/mnth (60 Days Late)
2nd Mortgage - $3272 - $125/mnth (30 Days Late)
Secured Loan - $482 - $40/mnth (Current)
Car Payment - $5700 - $215/mnth (Current)
Car Payment - $14,450 - $415/mnth (Current)
Student Loan - $35,000 - $127/mnth (120 Days Late)
Capital One Credit Card - $4669.95 (120 Days late)
Wells Fargo Credit Card - $2967 (30 Days Late)
Credit Union Loan - $1225 (Current)
Juniper Credit Card - $3842.29 (120 Days Late)
Gap Credit Card - $126.00 (Current)
Home Depot Credit Card- $2906.75 (90 Days Late)
GE Money Credit Card - $2100 (60 Days Late)
IRS - $10,760 (Current)
Condo Association - $3500 (Current)
Loan - $1225 (Current)

So all in all, we had (2) Mortgages, (2) Car Payments, (3) Loans, (6) Credit Cards, (1) Student Loan, (1) Debt to the IRS, (1) Debt to a Condo Association

Fast Forward to today, and we have the following status-

Mortgage- $0 (Sold in December 2012, Living with family currently)
2nd Mortgage - $0 (Paid off in January 2012-CLOSED)
Secured Loan - $0 (Paid off in January 2012-CLOSED)
Car Payment - $7200 - $215/mnth (Current)
Car Payment - $8500 - $415/mnth (Current)
Student Loan - $30000- $127/mnth (Current)
Capital One Credit Card - $$0 (Paid off in January 2012-CLOSED)
Wells Fargo Credit Card - $2600 (Current)
Credit Union Loan - $0 (Paid off in January 2012-CLOSED)
Juniper Credit Card - $0 (Paid off in January 2012-CLOSED)
Gap Credit Card - $90 (Current)
Home Depot Credit Card- $0 (Paid off in January 2012-CLOSED)
GE Money Credit Card - $0 (Paid off in January 2012-CLOSED)
IRS - $2500 (Current)
Condo Association - $0 (Paid off in December 2012-CLOSED)
Loan - $0 (Paid off in January 2012-CLOSED)

Right now we have $50890 in total debt (A Reduction of $224,110 in debt in 2011!) , Everything that has a balance has been current since January 2012, (0) Mortgages, (2) Car Payments, (0) Loans, (2) Credit Cards, (1) Student Loan, and (1) Debt to the IRS

My question to you guys is, when should we be safe to apply for more credit? We are in the process of buying a house, and we wanted to put things on a credit card, or various credit cards. The only problem is, we are afraid to apply and get denied. We are buying a $300,000 house, we make $150K a year, and our DTI with our House payment included would be approximately 22%.

Should we be nervous? We want to get a Lowe's card, and a major credit card (Chase, Capital One, Etc.). We fear rejection......Would we be able to get approved for anything considering back in 2011, we had late payments?

My Mid score is 658, and my wife's is 680

I apologize for the long question, and all the info, but I figured the more info I share, the easier it would to get an answer!!

Thanks is advance!

Re: When to apply? How do they decide if you get approved or denied?

dodfire — Thu, 28 Feb 2013 12:47:21 GMT

Ummm....do you honestly think that MORE credit is the best choice??

Re: When to apply? How do they decide if you get approved or denied?

ccubedzx3 — Thu, 28 Feb 2013 12:58:29 GMT

The BEST choice? Absolutely not....The BEST choice would be to pay for things cash, I know this. However, from that dreadful time of our life in December 2011 until now, we have maintained a budget, and have some cushion for paying back any new credit we could acquire.

I am quite proud of the fact that we paid off so much of our debt, and now we want to dip our toes in the water and acquire more credit (no more than $15,000 total) and responsibly pay it back, on time....

Re: When to apply? How do they decide if you get approved or denied?

Anonymous — Thu, 28 Feb 2013 13:06:27 GMT

i do not recommend that you apply for any card right now, only because it might affect your mortage rates.

if you have already been approved of a mortage, grats!

most banks however are very skeptical of extending further credit immediately following a big purchase (house/car) for fear that you might already be over-extended to the extent where you're juggling debt between different banks. so even if you do get approved, you're gonna get a high APR which is totally not worth it.

Most prime cards require a higher score. Store cards are easier to get, but at the same time, it is not worth paying interests, unless they have zero APR introductory offer and you're confident of being able to pay it in full before accruing all kinds of fees and interests.

is the money owed to IRS a lien?

when your previous mortages were sold, was your house sold through short sale or foreclosure?

were the cards completely paid off when you closed them, or did you negotiate with the banks?
how long ago were the late payments?

All these factors come into play. You have a high annual income though so banks like that as well. As for Chase, I am guessing that as long as you have a good banking relationship with them, they'll be a lot more inclined to offer you credit. Easiest way is to start a checking with them and stash your money in there. You can also try to have Wells Fargo raise your CL. If you have checkings/savings with them and can show a healthy average balance amount, they'll probably be a lot easier to work with.

Best of luck!

Re: When to apply? How do they decide if you get approved or denied?

dodfire — Thu, 28 Feb 2013 13:05:53 GMT

Oh I am not passing judgment on you. That is a very impressive dollar amount to pay back in such a short period of time and to have a savings left over all on a $150k income...very impressive.

My point was only that you still have a LOT of outstanding debt and purchasing a home for $300k. Having first hand knowledge of how fast things can spin out of control.

Re: When to apply? How do they decide if you get approved or denied?

ccubedzx3 — Thu, 28 Feb 2013 13:19:00 GMT

In response to enharu:

i do not recommend that you apply for any card right now, only because it might affect your mortage rates. I wouldn't apply until after we close, and move in.

if you have already been approved of a mortage, grats! Thank you!

is the money owed to IRS a lien? This debt will be repaid in full once I send in my tax return this year. It was money owed from 2009, and was not a lien

when your previous mortages were sold, was your house sold through short sale or foreclosure? It was sold by owner, and sold for exactly what I owed

were the cards completely paid off when you closed them, or did you negotiate with the banks? They were paid in full, not settled or reduced.

how long ago were the late payments? January 2012 was the last late payment

Best of luck! Thank you!!!

Re: When to apply? How do they decide if you get approved or denied?

ccubedzx3 — Thu, 28 Feb 2013 13:24:13 GMT

dodfire, I don't think you were passing judgement, I appreciate your insight!

I understand I have a lot of debt left, but the majority of it is the student loan that has a small payment per month.....Both cars will be paid for within two years, and the IRS will be paid in full within the next month or two once I do my taxes. That will leave us with a mortgage (2000/mnth) , and the 2 credit cards (20/mnth, 60/mnth).

I am not a big proponent of credit as you can see from my past, but I want to keep my cash reserves for a bit, and would prefer to take advantage of 0% on appliances/furniture, and pay them in full before the 0% expires rather than plunk down approximately $7000 in cash on appliances/window treatments.

Re: When to apply? How do they decide if you get approved or denied?

ccubedzx3 — Thu, 28 Feb 2013 13:26:11 GMT

All in all, with everything I have posted being considered, would I have a greater chance of getting approved or denied if I were to apply after we move in May?

Re: When to apply? How do they decide if you get approved or denied?

dodfire — Thu, 28 Feb 2013 13:50:13 GMT

In my opinion you have a fair chance at getting a lower limit card. I do not see that you would be able to get a $10k credit card.

Do you have any way to get in with NFCU?

When was your last 30-60-90-120 late payment? 2011? What month?

EDIT** Sorry I didnt see you already answered about the late payment.

Re: When to apply? How do they decide if you get approved or denied?

Anonymous — Thu, 28 Feb 2013 14:42:58 GMT

What are is your current cash to close situation? Are reserves required to close? I just closed on a home 2/6/13, we spent about $7,000 on things needed for the house but most of it was paid in cash. I put most of it on credit card but I am paying everything off in full this month. Your DTI is pretty good for your income and home price. If you are doing an FHA loan, a lower credit score will most likely not lead to higher interest. Higher interest is more so for conventional loans. But your scores are just hovering above borderline if the min required is 640. So you don't want the new accounts to drop your score below 640 before you close as lenders often do another credit pull right before closing and if your score drops below 640 with that pull, you will be denied if the min required score is 640. So apply after closing and after your loan is funded. I agree with the others that you will most likely get low limits.

Re: When to apply? How do they decide if you get approved or denied?

ccubedzx3 — Thu, 28 Feb 2013 14:54:30 GMT

I need to bring approximately $8000 cash to close. It is already put aside and ready to go

Reserves are not needed

I am doing FHA with 3.5% down

What is the determining factor in deciding our available credit limit? Our previous cards that are now closed had the following limits:

Capital One- $5000 limit
Wells Fargo - $2700 limit
Juniper Bank - $4000 limit
Home Depot - $4000 limit
GE Money - $ 2500 limit

So all in all, we had $18,200 in available credit back in the day. Why would we only get low limit cards now when we have less debt and more income? When could we get higher limit cards?

I see no point in applying for low limit cards when we can pay cash instead. I am looking at approximately a $7000 purchase for appliances and window treatments.

Thanks in advance for your answers!

Re: When to apply? How do they decide if you get approved or denied?

Anonymous — Thu, 28 Feb 2013 15:04:35 GMT

Reason is because of all those late payments. CCCs will want to see that you can manage higher limit cards without late pays first. You are starting back at zero again. You will have to start with low limit cards, get credit limit increases over time, and apply for better cards in the future. Key is you HAD high limit cards. You don't anymore and banks will see that in the past, you didn't manage high limit cards well. So they will start you off in the baby pool to see how you do. Banks like Chase don't like to give customers their first high limit card. They want to see how well you manage another bank's high limit card first. The trick will be finding a bank that will give you your first high limit card. You will have to manage low limit cards first before you have a chance at getting a higher limit credit card.

Congrats on the home! :-)

Re: When to apply? How do they decide if you get approved or denied?

dodfire — Thu, 28 Feb 2013 15:10:10 GMT

All true......they are going to want to see about a year of use on some revolving accounts before they give you any decent limit.

And yes...Congrats on the new home!!

Re: When to apply? How do they decide if you get approved or denied?

Burned2manybridgesB4 — Thu, 28 Feb 2013 15:10:51 GMT

A grasp of the situation is to figure complete DTI, instead of how just the mortgage payment fits into the paycheck.

The lates are gonna hurt for a while once they hit 60's, and higher.

I'm sure you've done your homework on the recent changes to PMI, interest write offs now...

Even though you've dug out, you're not quite out of the woods.

Auto/home loans are "secured," in the fact that there's collateral attached, but burning CC's, and tying in derogs into your report won't help get a high limit CC, especially since what revolvers you do have left open resemble mostly what rebuilders use.

Re: When to apply? How do they decide if you get approved or denied?

ccubedzx3 — Thu, 28 Feb 2013 15:24:02 GMT

All great information! Thank you all for sharing...Big help! I appreciate all the knowledge I have gained here. I first started in the mortgage forum, and they gave me all the info I needed to get pre-approved and then ultimately approved. I hope to find the same knowledge in this forum.

Would you advise digging in and getting a low limit card now and work it up, or just wait altogether and apply a couple years from now?

Re: When to apply? How do they decide if you get approved or denied?

dodfire — Thu, 28 Feb 2013 15:30:31 GMT

IMO I would wait until after you close on the house and try to get WF to raise your limit to $5k then app for a new card, they might match the limit for you.

Re: When to apply? How do they decide if you get approved or denied?

Burned2manybridgesB4 — Thu, 28 Feb 2013 15:34:40 GMT

Pay attention to your scores once the mortgage starts reporting. That alone will tell you if you need to wait a while, in regards to seeking another CC immediately.

Re: When to apply? How do they decide if you get approved or denied?

ccubedzx3 — Thu, 28 Feb 2013 15:46:53 GMT

I don't know if this would matter or not but I did a score analyzer and if I paid down my Wells Fargo Card (which I will do when my tax refund comes back) to 5% utilization, my score should go from 658 to around 705

Same thing goes for my wife, her Gap card has a $160 limit and if she pays down she will be aorund 715/725

Would this help with attaining credit?

Re: When to apply? How do they decide if you get approved or denied?

Burned2manybridgesB4 — Thu, 28 Feb 2013 15:49:09 GMT

Problem with score estimators, is that they're not using the "true algorithm," of what the mysterious fico gods use, and nobody's telling the core secrets.

Take the estimate with a big grain of salt. You're better off pulling your scores here, once you know the mortgage hits your CR.

Re: When to apply? How do they decide if you get approved or denied?

dodfire — Thu, 28 Feb 2013 15:54:59 GMT

I want to be more positive.....but....

The truth is...yes the decrease in utilization will raise your score. The raise in score will help your chances of being approved for the card.

However, when credit limits are set it is not based ONLY on your score, they look at the big picture. I seriously doubt that they are going to start you out with a high limit. You might get lucky with someone that will do a recon and give you the chance to explain things. But, it is a reach in my opinion.