20 Yrs. Old - Needs Some Guidance

[drew11]

Hey everyone, I've been lurking on these forums for awhile now and wanted to give you all much thanks as you have helped me build up my credit. I am hoping on applying for a mortgage in 2 years from now and am trying my best to get my credit score as high as possible for once that day finally arrives. I understand that a "mix of credit" increases one's score and as of right now the only type of credit I have are credit cards. I was hoping someone could offer me some advice on what the best course of action I should take (perhaps opening up a 12 month installment loan)? Below is my credit history and scores:

Credit Cards:

PenFed Platinum Cash Rewards - Open for amost 2 years - $500 CL (my first credit card which meant that I needed to cosign with my mother otherwise no approval)

Chase Freedom - Open for 4 months - $3000 CL (completely mine! )

American Express BCE - Applied 2 weeks ago -> denied

Discover More - Applied 2 weeks ago -> Accepted! - $1500 CL

Credit Scores:

TransUnion - 740 (Received with Discover More acceptance letter) (Credit Karma = 742)

Experian - 723 (Received with American Express rejection) (Credit Sesame = 721)

Equifax - ???

These were the reasons that AMEX said that I was denied (pulled from Experian):

Length of time accounts have been established.
Too many inquiries last 12 months.
Lack of recent installment loan information

So what do you guys think?

[marty56]

Welcome to the forum.

You don't need to apply for any more CCs.  Just let one of the CCs report a a balance of 9% or less and always PIF.  Use each card but don't ever max them out.  Plese get toy EQ and TU FICO scores from here so you know what you baseline FICO score is.  Time will be your best friend.

Unless you need a car, I would forget the installment loan and on the mortgage you should remember that DTI and work history also plays a role in getting a mortage so take your time.  

[llecs]

I'd also skip the loan. You can easily hit into the 800s without a mortgage or loan; many on here have. Plus the new credit is draining your scores. Adding a loan won't improve that.

Whether a higher FICO is the goal or a mortgage is a goal, not applying for anything over the next couple of years will get your to that goal.

[drew11]

Ok so no loan then and I've been keeping my cc util % under 9% already so I'll continue to do so for the next two years. Thanks everybody!

[Revelate]

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@drew11 wrote:

Ok so no loan then and I've been keeping my cc util % under 9% already so I'll continue to do so for the next two years. Thanks everybody!

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I'm of a slightly different opinion: yes your scores are depressed from new accounts already, but installment loans do count, it's a bonus to have them, and it's better to take the negative of a new tradeline when you have a bunch of other new tradelines... and then letting the magic of time do it's thing with regards to FICO since a good chuck of the algoritm is predicated on time passing.

Anyway, my thoughts, and as illecs correctly points out, there's no mandatory reason to get an installment loan, but it may help with obtaining a better APR with some of the industry-specific options in addition to the standard Classic FICO we all somewhat measure ourselves by.

[drew11]

So what if I took out a relatively small student loan out and paid it off within a year? Would that be considered an installment loan and possibly help in the future to obtain a better mortgage?

[marty56]

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@drew11 wrote:

So what if I took out a relatively small student loan out and paid it off within a year? Would that be considered an installment loan and possibly help in the future to obtain a better mortgage?

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Bad idea.

[Repo-ed]

The only type of loan I would suggest taking out is a small 1k loan from a CU for between 6-12mo.

They can/will put that loan monies into a savings account, and auto-draft the monthly pmt right from the savings account.

[Anonymous]

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@drew11 wrote:

So what if I took out a relatively small student loan out and paid it off within a year? Would that be considered an installment loan and possibly help in the future to obtain a better mortgage?

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Here's the thing.

You don't need an installment loan to better secure a mortgage. I've seen it done all the time where people have had just 3 revolving lines and that was good enough.

Heck, my DGF was one of them, she had about 6 CC's and nothing else when she secured her mortgage.

Don't take out a loan for the sake of a score. That's money wasted.

If you were denied for the BCE, eventually try for the Zync or wait for a while and see how these cards benefit your score.

Here's the good news: You're 20.

[drew11]

Ok thanks. Should I get my FICO scores now or wait until they reflect the pulls from the two recent inquiries? I don't want to purchase them now and have a false idea of where I'm at when they are possibly going to change.