Dental student and credit strategy

[soxinabox]

Hi

I am currently a second year dental student. I'll be graduating in May 2021, and will either start working immediately, or do a 1 year post grad residency. I made a few bad calls with credit recently and saw my scores tank from around 720 to the mid 600s. Looking for advice and a strategy to bring my credit back up by the time I graduate. One short term goal I have is to take out a loan/lease a car when I graduate in 3 years since my current car is 15 years old and falling apart. Another goal is to purchase/own a dental practice by the end of 2024 and be a homeowner by the end of 2025. Currently living off of federal loans, but expected income upon graduation is 120-200k.

As of today 6/26/2018 my scores are:

Equifax 646 8 inquires

Transunion 670 8 inquiries

Experian 659 9 inquiries

0 missed payments or other deragotory marks on any report

I got a little trigger happy last week and decided to apply for 5 new cards, all of which were denied.

Requested and received a CLI from Discover, Citi, Banana Republic, and Synchrony last week. Pending 3x CLI from AmEx.

Current utilization as reported is 39%. Will be around 30% after new CLIs are factored into the report.

Most recent account is 2 months old.

Average age of accounts is 20 months due to having to open 3 new student loans per year.

Age of oldest account is 4 years.

Cards:

Chase Freedom Unlimited 04/2018 $9600

Chase Sapphire Preferred 04/2018 $17,300

AmEx BCE 04/2018 $2000 (pending CLI)

Banana Republic 07/2017 $5000

Discover IT 07/2017 $2500

CITI DoubleCash 07/2017 $7300

(Local) Credit Union 06/2016 $2500

CareCredit 04/2015 $8000

Overall credit: $54,200

Overall util ~30%

Will have a sizeable amount of student debt upon graduation. Nothing I can do about that. More than 300k, less than 500k.

My strategy right now is to minimize credit spending as much as possible to let my accounts age. I am also thinking about using student loans to pay off a significant portion of the debt, let the low util report, and apply for a couple high limit cards next August after all of my inquiries fall off. I understand that I have to be very careful with this and control my spending habits. I plan on making minimum payments of income based repayment on  student loans after graduation while my income grows, and aggressively paying off my current credit card debt as soon as possible.

I know this could turn disastrous if gone wrong, but if managed well, is this a strategy that should be carried out? What other options do I have for boosting my score besides not spending any more on credit (it's inevitable that I will have to at some point for board exams, post grad applications, travel, etc) and simply paying the minimums until graduation?

Thanks in advance

[soxinabox]

Hi

I am currently a second year dental student. I'll be graduating in May 2021, and will either start working immediately, or do a 1 year post grad residency. I made a few bad calls with credit recently and saw my scores tank from around 720 to the mid 600s. Looking for advice and a strategy to bring my credit back up by the time I graduate. One short term goal I have is to take out a loan/lease a car when I graduate in 3 years since my current car is 15 years old and falling apart. Another goal is to purchase/own a dental practice by the end of 2024 and be a homeowner by the end of 2025. Currently living off of federal loans, but expected income upon graduation is 120-200k.

As of today 6/26/2018 my scores are:

Equifax 646 8 inquires

Transunion 670 8 inquiries

Experian 659 9 inquiries

0 missed payments or other deragotory marks on any report

I got a little trigger happy last week and decided to apply for 5 new cards, all of which were denied.

Requested and received a CLI from Discover, Citi, Banana Republic, and Synchrony last week. Pending 3x CLI from AmEx.

Current utilization as reported is 39%. Will be around 30% after new CLIs are factored into the report.

Most recent account is 2 months old.

Average age of accounts is 20 months due to having to open 3 new student loans per year.

Age of oldest account is 4 years.

Cards:

Chase Freedom Unlimited 04/2018 $9600

Chase Sapphire Preferred 04/2018 $17,300

AmEx BCE 04/2018 $2000 (pending CLI)

Banana Republic 07/2017 $5000

Discover IT 07/2017 $2500

CITI DoubleCash 07/2017 $7300

(Local) Credit Union 06/2016 $2500

CareCredit 04/2015 $8000

Overall credit: $54,200

Overall util ~30%

Will have a sizeable amount of student debt upon graduation. Nothing I can do about that. More than 300k, less than 500k.

My strategy right now is to minimize credit spending as much as possible to let my accounts age. I am also thinking about using student loans to pay off a significant portion of the debt, let the low util report, and apply for a couple high limit cards next August after all of my inquiries fall off. I understand that I have to be very careful with this and control my spending habits. I plan on making minimum payments of income based repayment on  student loans after graduation while my income grows, and aggressively paying off my current credit card debt as soon as possible.

I know this could turn disastrous if gone wrong, but if managed well, is this a strategy that should be carried out? What other options do I have for boosting my score besides not spending any more on credit (it's inevitable that I will have to at some point for board exams, post grad applications, travel, etc) and simply paying the minimums until graduation?

Thanks in advance

[Anonymous]

Transferring debt that could be discharged in a BK (should financial tragedy strike) to student loans (non-dischargeable) is a terrible idea.

Don't apply for anymore cards . .try not to incur any more debt. Live like you do now for the first 6 months or a year or whatever once you're working and knock out your CC debts . . . your scores will bounce right up then and you'll be in fine shape to finance something if needed.  I'd do it a few years longer and take a chunk out of those student loans.

Don't be anxious to spend money you're not even making yet. You are likely going to enter the workforce at the low end of your expected range and taking the loans into account, will basically just be a middle class salary for a while.

[Anonymous]

Great advice by Steeler.  Develop a hard core budget that will enable you to pay off your CC debt entirely.  Aim to do that as soon as is realistically possible, without making yourself miserable.

I see no advantage in you applying for any more cards in the next ten years.  More cards will not help you pay down your debt, which is what you need to do.  You already have plenty of cards from the perspective of the credit scoring models.  If you only had 1-2 there would a good case for planning to get more.  But you have 8.

I would consider doing a product change for any cards that involve an annual fee -- and if that is not possible, closing them.  E.g. the Chase Sapphire Preferred.

[Appleman]

Live like a Dentist while a student = living like a student once a Dentist. Same can be said for any number of professions.

$500,000 student loan at 3% for 20 years is equal to $2,773.99 every month.

$150,000 a year (working for another dentist who owns the practice) is $12,500 a month. To stay within a 40% DTI range you are looking at limiting expenses of $5000 monthly or $2,226.01 per month after making your student loan payment (conservative napkin math).

The hope is you are closer to $300,000 in student loans and have rates below 3% for the dental loans.

For you, keeping the perfect payment history is the best thing you can do. Develop a budget to manage current expenses and not create new debt. Time will boost your scores, especially if you do not create further debt (aside from student loan debt).

I know for some professions there are student loan repayment programs if you practice in under-serverd areas. (I know nothing about such programs for dentistry but imagine there are some available). 

The ultimate goal is becoming debt free allowing yourself freedom to become your own boss. The potential is there, your future self will thank you for the positive changes you make today.

Good luck!