topic Re: Need advice on whether or not to open credit. in Understanding FICO® Scoring

Need advice on whether or not to open credit.

Anonymous — Fri, 01 Dec 2017 01:33:39 GMT

My wife and I ran into issues about 2 years ago. We worked hard to recover since then and recently went to apply for a mortgage. While I was ok, wife's median credit score is a few points (4 or 5) low using myfico lending scores. We took a month to dispute things on CRs, and paid off outstanding stuff. I've read a number of posts about how to rebuild credit on these boards but being only a few points shy, I'm not certain if I should start doing them.

We currently have no outstanding balances, no open accounts, 2 or 3 collection accounts that we've not been able to get rid of from the CR, but they are paid or settled. She has 3-4 good accounts, and 3-4 with some late pays. Average account age is around 70-80 months.

Wife had a collection account that agreed to delete, which it already did on Experian, but EQ and Transunion haven't deleted yet.

My ideal would be for the Collection to come off and put her in range for the mortgage, then after closing/moving opening a few revolving accounts to continue building, I am just not sure how realistic that is. Wife is due in late February which is why I am trying to buy a house (we need more space). I considered opening the secured cards now, because it seems that not having any open accounts is the biggest score killer atm.

So my question is, should that single collection getting removed add 4-5 points, at which point we can rapid rescore? If that is unlikely, will probably go ahead and do the secure cards now for the increase that should come in 2-3 months?

Re: Need advice on whether or not to open credit.

HeavenOhio — Fri, 01 Dec 2017 06:39:37 GMT

Don't apply for new credit until the mortgage has closed. Inquiries and new accounts will likely ding your score in the short term.

Re: Need advice on whether or not to open credit.

Anonymous — Fri, 01 Dec 2017 08:56:27 GMT

Agreed that apping when you have a mortage coming up is a bad idea.

Whether or not a collection removal would result in any scoring gain is questionable. Since you have other major baddies present there's a chance you could see no scoring gain at all from it. If it is your most recent major baddie, perhaps you would see the few points you're looking for.

Re: Need advice on whether or not to open credit.

DollyLama — Fri, 01 Dec 2017 12:40:25 GMT

So of the 3-4 accounts she had, they are zero balances and closed accounts by credit grantor or consumer request? How long ago were they closed? Are all only installment or any revolvers in there that is perhaps paid but still with an active line of credit?

Re: Need advice on whether or not to open credit.

Anonymous — Fri, 01 Dec 2017 12:50:11 GMT

Thanks for the responses. @Dolly the 2 of the accounts were closed by being paid off (auto loans). The other was revolving line of credit that I asked to be closed but shows as closed by grantor. But all are completely closed no balance. The my fico simulator showed between a 40 to 80 point bump across 3 bureaus if I opened a low limit cc. I know it can take a bit to recover from the hard inquiry though. I do not know how accurate the simulator is either.

Re: Need advice on whether or not to open credit.

Anonymous — Fri, 01 Dec 2017 14:36:52 GMT

I have a different take than Heaven, BBS, etc. It's just a different opinion. None of us can know for sure what will happen.

Normally they are right: avoid opening new accounts shortly before you buy a house. But in our OP's case the OP's wife has no open accounts of any kind. Because of that I think that the wife is likely to get on the whole a substantial benefit from opening a credit card and having it report a small balance (less than 8.99% of the credit limit).

One thing worth clarifying, however, is who will be opening the credit card. In the initial post, it is the wife that needs the scoring help. But in the last post (and also to some extent in the first post) it is the husband who is being proposed as the person to open a card.

Re: Need advice on whether or not to open credit.

Anonymous — Fri, 01 Dec 2017 14:50:04 GMT

You are right, in my earlier posts, my wife needs the few extra points, but I made it sound as if I were going to open the accounts. It's the hazard of being married for 18 years, you tend to use interchangeable phrasing when discussing spouses.

While we both eventually plan to open cards, she is the focus atm, because she needs a few points. I could wait till later to open revolving accounts.

As I see it, we can wait a few days for the deletion, if it gives her a few points then we can wait till after closing. OR we can open a secured navyfcu card for her, and hope the point gain when it posts in a month gains more than the inquiry would take off. If that's unlikely, I can try to qualify without her, and refinance it in a year when we are further along in rebuilding. The flip side to this is our 1 year lease period is up in mid January, so we can't really hesitate too long on the issue.

Anything wrong in my assumptions or reasoning?

Re: Need advice on whether or not to open credit.

Kree — Fri, 01 Dec 2017 14:52:57 GMT

@Anonymous wrote:
I have a different take than Heaven, BBS, etc. It's just a different opinion. None of us can know for sure what will happen.

Normally they are right: avoid opening new accounts shortly before you buy a house. But in our OP's case the OP's wife has no open accounts of any kind. Because of that I think that the wife is likely to get on the whole a substantial benefit from opening a credit card and having it report a small balance (less than 8.99% of the credit limit).

One thing worth clarifying, however, is who will be opening the credit card. In the initial post, it is the wife that needs the scoring help. But in the last post (and also to some extent in the first post) it is the husband who is being proposed as the person to open a card.

My understanding is that neither of them have any open accounts.

OP: I would suggest talking to the loan officer about how much inquiries will effect their morgage. If score is tops, then a CC each and a SSL each could bump both of your scores by 50-100 points. Yes there would be 4 more inquiries, but depending on how many you already have...

Note: do not open anything without talking to your loan officer. Also do not assume you will get 100 points each, I might have misread the information you gave me, or you might not have given a piece of information that would change the predicition. This could lose points. but it is worth discussing as an option. There are several score gurus here who might give more accurate insight.

Re: Need advice on whether or not to open credit.

Anonymous — Fri, 01 Dec 2017 15:10:56 GMT

@kree yes, your reading was correct. We have no open accounts of any kind, but we had a good installment closed about 1.5 years ago, which is why I hadn't really considered the ssl loan. Our bank would give us a ssl with no hard pulls on credit. If we go the secured card route, my intent was to try to get a one for each of us at $500, and put both of us on each other's card. That would hopefully limit it to 1 hard pull on each of us, but add 2 accounts. I had spoken to the mortgage broker about this but he wasn't able to give very firm (nor overly accurate) answers. From other posts in forum it seems like we would want between 2 dollars to 8% balances on cards, which isn't a problem, we rebuilt our reserves since I got hurt. In the last 2 years we had only 1 hard inquiry (trimerged report).

Re: Need advice on whether or not to open credit.

Kree — Fri, 01 Dec 2017 15:22:54 GMT

I would wait for others to voice in. But I believe SSL would give you an immediate point boost as it is intended to. But just to check. No open car loans, or anything?

Any need for a new car? some mortgages disregard car loans and car loan inquires, but the open loan would help your score. Make a neice happy with her first moped for christmas? Make a sister unhappy with her daughters first moped for christmas?

Re: Need advice on whether or not to open credit.

Anonymous — Fri, 01 Dec 2017 18:27:52 GMT

Remember that our OP is planning to buy a home. This means that the FICO scoring models that will be used are the much older "mortgage" models, not FICO 8. The available testing we have on the mortgage models is mixed, but there is a strong consensus that two of the three scores will get no help from the SSL technique. That said, it might help one, which conceivably could affect the middle score, thought it will also lower the AAoA.

The idea of each person adding a secured card seems (to me) very sound. I would make the minimum balance a bit higher than $2 personally, since there has been a few cases reported of $2 being reported as $0. $4 should be fine. If the credit limit turns out to be $200, that gives a wide range: $4.01 - $17.99.

As far as the idea of making sure the lender reviews and affirms all score related steps, that's a good idea in a way, though it will preclude using the SSL technique if that is something the OP wants to do. The lender will never have heard of it and will not be competent to assess its value. Bear in mind that the earliest you should expect to see the Alliant loan appearing would be Jan 19.

A large part of our OP's problem is that he and his wife have waited until a couple months before they plan to buy a house to begin planning for it from a credit perpsective. I am sure the OP realizes that so nobody here is beating him up about it, but it is still worth emphasizing for anyone else reading the thread, as a takeaway lesson.

Re: Need advice on whether or not to open credit.

Anonymous — Fri, 01 Dec 2017 20:21:12 GMT

Thanks for all the advice. Yes I knew that this was short range thinking, it was just a culmination of things coming together, lease ending/baby coming etc. We had intended to wait 2 years while some of the derogatories aged. Good news is that 2 collections were deleted from her report this morning, and we were able to get a pre-approval. I will definetly look into the secured cards later. Thanks again!

Re: Need advice on whether or not to open credit.

Kree — Fri, 01 Dec 2017 20:39:56 GMT

@Anonymous wrote:
Remember that our OP is planning to buy a home. This means that the FICO scoring models that will be used are the much older "mortgage" models, not FICO 8. The available testing we have on the mortgage models is mixed, but there is a strong consensus that two of the three scores will get no help from the SSL technique. That said, it might help one, which conceivably could affect the middle score, thought it will also lower the AAoA.

And this is the perfect example of why I keep saying "don't take my word for it let others weigh in", thanks for the clarification, I'm still new to this and did not consider the mortgage score aspect.