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Hmm, positive or negative?

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Regular Contributor

Hmm, positive or negative?

*Posting in general since this is kind of a mix of everything here: auto loan, mortgage loan, scoring calculation, credit cards...*

At an awkward situation. I do intend to buy a house at the end of this year (provided I don't hate everything on the market again, ugh)...but very interested in a vehicle that is for sale.

I could buy it outright, but that'd likely leave me with too small of a comfortable housing downpayment. I'd still put a sizable down payment on the car, and just finance the remainder (~9k or less, after taxes & fees).

My credit scores are all in the mid to high 700s, be it FICO 8, auto, or mortgage scoring models.
My credit mix is mostly what keeps me out of the 800 club. 2 revolvers and 1 charge card. That's it. One old closed car loan is still showing. No missed payments on anything. Squeaky clean reports.
The cards were opened:
Rev1 October 16
Rev2: Mar 18
Charge: Apr 19

Average age is 1 year 11 months (the other factor keeping my scores 'low').

We know that having 1 installment loan has a positive effect on scoring...but it'd be a high % remaining reporting loan (~80%). Plus a ding in credit age (but not too much, since the account will have ~10 months of age to it).
If I open a loan, thinking 48 months to keep monthly payments low for debt to income ratio reasoning (speaking of, income was lower end of 90k this past year)--but probably pay it off by early 2022 the latest and not waste money on interest.
Think this would improve or lower my score for mortgage purposes come end of the year?


Wild thought...
Lots of credit card offers are out there for me.
If the dealer allows it, I could put the 9k onto a 0% intro credit card. Would have to get a decent starting limit, but that ought to happen. Pay down 3k of it to 6k...and then suck it up and pay balance transfer fee to my revolver with a 35k limit, making the credit utilization look pretty good. Possibly borrow 3k from a friend or brother prior to make it only a 3k transfer & to keep utilization under 8.9%...? Then open a new 0% card post house and transfer there to have everything paid off by the end.

I should take advantage of some banks with their checking account sign up bonuses...

Inquiries are at 3 TU, 1 EQ, 2 EX. They would all age off just before mortgage time.



Bleh, decisions, decisions...

 

 

EDIT: additional thought...

The 35k card is an amex. If the credit card option is a good move & amex is accepted...the cash magnet is 1.5% back, 150 sub, and I could just transfer credit limit to it and save on a transfer fee and avoid that month of interest during mortgage process. No wasted inquiry either. 

Message 1 of 9
8 REPLIES 8
Highlighted
Super Contributor

Re: Hmm, positive or negative?

You need more cards for long term but if you’re fixing to get a mortgage you need 12 months ( more is better) clean with no New accounts, no applications for credit or inquiries. So if you’re going to do the car/cards thing you may need to postpone the mortgage thing.
For a collection of our current FICO scoring wisdom, updated as we learn, read the following. Watch the revision dates on the bottom of the first 8 posts as they are regularly updated: Link to Scoring Primer.


RIP:




Updated Oct 2020, unless otherwise noted.

(Forgive typos, mobile.)(Everything said is Just IMHO.)

In order to better answer your questions and record your DPs, please provide your profile stats: Any baddies? Severity and recency? (clean/dirty), Number of accounts, both open and closed on CRs (thick/thin), AoOA? (Mature/young), AOYRA-Age of Youngest Revolving Account (new accounts/no new accounts)? Open/closed loan on CR?
For example, mine is clean/thick/mature/new account, with open loan on record.
If you don't know where you fall, just detail any baddies, your number of open and closed accounts, AoOA, AOYRA and whether you have a loan on record to start.

For utilization questions, list individual and aggregate utilizations, revolving and installment, please.
Message 2 of 9
Highlighted
Regular Contributor

Re: Hmm, positive or negative?

That is entirely untrue.

In 2018 I had no problem going through the mortgage process with the Mar'18 card.

I had already gone through paying lawyer, home inspector, house appraisal by bank, etc with finance officer saying "pick a closing date." The transaction didn't happen only because I walked away when the seller failed to complete remediations to the house that they said would be done.

 

 

Not opening new lines of credit is more of a rule for those who are just barely qualifying for a loan and/or have a debt to income ratio that would be stressed.

I'm in the predicament of manipulating credit to stay at the lowest possible apr offered from banks. Being qualified for a loan isn't an issue here.

Message 3 of 9
Highlighted
Super Contributor

Re: Hmm, positive or negative?

I didn’t say it was impossible. I told you what common wisdom recommends.

And from what you’ve told us about your profile, it’s young and thin, so yeah qualification for a mortgage could very well be an issue, if you have new accounts. But there may be a lot more to the story.

I have no desire to argue, I’m through with it.
For a collection of our current FICO scoring wisdom, updated as we learn, read the following. Watch the revision dates on the bottom of the first 8 posts as they are regularly updated: Link to Scoring Primer.


RIP:




Updated Oct 2020, unless otherwise noted.

(Forgive typos, mobile.)(Everything said is Just IMHO.)

In order to better answer your questions and record your DPs, please provide your profile stats: Any baddies? Severity and recency? (clean/dirty), Number of accounts, both open and closed on CRs (thick/thin), AoOA? (Mature/young), AOYRA-Age of Youngest Revolving Account (new accounts/no new accounts)? Open/closed loan on CR?
For example, mine is clean/thick/mature/new account, with open loan on record.
If you don't know where you fall, just detail any baddies, your number of open and closed accounts, AoOA, AOYRA and whether you have a loan on record to start.

For utilization questions, list individual and aggregate utilizations, revolving and installment, please.
Message 4 of 9
Highlighted
Super Contributor

Re: Hmm, positive or negative?

As you are already aware, this could be argued in 47 directions...

 

If it were me, I'd purchase the car with a smallish down payment, then make a large pay down on the new auto loan AFTER it reports.

 

In our case, when we were ready to purchase a home, we had to provide written reasons for all inquiries in the last 12 months.  There were two, and we provided written reasons.  Another step, but no difficulties.

 

Good luck!



09/25/20 Mortgage scores: EX2 712, EQ5 710, TU4 no idea.
10/01/20 Fico 8: EX 709, EQ 722, TU 737.
10/03/20 Fico 9: EX 708, EQ 700, TU no idea...

Zero percent financing is where the devil lives...
Sitting in the garden behaving myself. #noinqs2020
Message 5 of 9
Highlighted
Senior Contributor

Re: Hmm, positive or negative?


@Rebuilt wrote:

That is entirely untrue.

In 2018 I had no problem going through the mortgage process with the Mar'18 card.

 


What was your AAoA in 2018, before your 2019 charge card app.?

What were your scores back then when you qualified for your mort compared to now?

”MY TAKE HOME PAY DON’T TAKE ME HOME”
Message 6 of 9
Highlighted
Super Contributor

Re: Hmm, positive or negative?


@Rebuilt wrote:

*Posting in general since this is kind of a mix of everything here: auto loan, mortgage loan, scoring calculation, credit cards...*

At an awkward situation. I do intend to buy a house at the end of this year (provided I don't hate everything on the market again, ugh)...but very interested in a vehicle that is for sale.

I could buy it outright, but that'd likely leave me with too small of a comfortable housing downpayment. I'd still put a sizable down payment on the car, and just finance the remainder (~9k or less, after taxes & fees).

My credit scores are all in the mid to high 700s, be it FICO 8, auto, or mortgage scoring models.
My credit mix is mostly what keeps me out of the 800 club. 2 revolvers and 1 charge card. That's it. One old closed car loan is still showing. No missed payments on anything. Squeaky clean reports.
The cards were opened:
Rev1 October 16
Rev2: Mar 18
Charge: Apr 19

Average age is 1 year 11 months (the other factor keeping my scores 'low').

We know that having 1 installment loan has a positive effect on scoring...but it'd be a high % remaining reporting loan (~80%). Plus a ding in credit age (but not too much, since the account will have ~10 months of age to it).
If I open a loan, thinking 48 months to keep monthly payments low for debt to income ratio reasoning (speaking of, income was lower end of 90k this past year)--but probably pay it off by early 2022 the latest and not waste money on interest.
Think this would improve or lower my score for mortgage purposes come end of the year?


Wild thought...
Lots of credit card offers are out there for me.
If the dealer allows it, I could put the 9k onto a 0% intro credit card. Would have to get a decent starting limit, but that ought to happen. Pay down 3k of it to 6k...and then suck it up and pay balance transfer fee to my revolver with a 35k limit, making the credit utilization look pretty good. Possibly borrow 3k from a friend or brother prior to make it only a 3k transfer & to keep utilization under 8.9%...? Then open a new 0% card post house and transfer there to have everything paid off by the end.

I should take advantage of some banks with their checking account sign up bonuses...

Inquiries are at 3 TU, 1 EQ, 2 EX. They would all age off just before mortgage time.



Bleh, decisions, decisions...

 

 

EDIT: additional thought...

The 35k card is an amex. If the credit card option is a good move & amex is accepted...the cash magnet is 1.5% back, 150 sub, and I could just transfer credit limit to it and save on a transfer fee and avoid that month of interest during mortgage process. No wasted inquiry either. 


In view of your interest in a mortgage I would advise you to refrain from any applications for new credit. If you do nothing but pay your bills and keep balances low your scores will just keep going up.

 

I.e., patience.

 

 


Total revolving limits 654000 (575000 reporting)

Message 7 of 9
Highlighted
Regular Contributor

Re: Hmm, positive or negative?

@Birdman7 wrote:
I have no desire to argue, I’m through with it.

None are here to argue. Simply a discussion. 

Your initial post came off pretty if-so fact-so. It probably wasn't your intention--it is just text on a computer screen can be read with different tones by different readers on the internet. I wanted to clarify a new account doesn't instantly nuke mortgages for anyone reading along & new to credit topics.

 

 


@tcbofade wrote:

If it were me, I'd purchase the car with a smallish down payment, then make a large pay down on the new auto loan AFTER it reports.


 Ooooo, now there's some snazzy thinking! Hmmm, rough estimate having the bigger loan paid down to under 50% owed. Monthly payments wouldn't be that much higher, so DTI % difference probably not a much of a factor.

 


@GApeachy wrote:

@Rebuilt wrote:

That is entirely untrue.

In 2018 I had no problem going through the mortgage process with the Mar'18 card.

 


What was your AAoA in 2018, before your 2019 charge card app.?

What were your scores back then when you qualified for your mort compared to now?


Ah, good Q.

Initial qualification was September'18, underwriting was Nov'19.

So...hold on, let me do some counting here, heh.

*beep* *beep* *beepity-beep* *beep*

 

Sept'18 Aaoa was:

Round down to 14 months.

Nov'18 round down to 16 months.

 

 

Since opening the charge card in Apr'19, my scores went up a bit, just from opening the card/having another line. From low-mid 7s to mid-high 7s. Scores have gone up 1-2 points from aging.

 

If I opened something now, would probably start reporting in February?  So 4 total lines would put aaoa in Sep'20 at 25 months; 27 months during a November underwriting.

So my file would be thicker, more diverse (if doing auto loan instead of o% apr card), and older aaoa compared to in 2018, along with youngest account being older than before by a month or so.

 

Alternatively, if I manage to open no new lines (stay at the 3 cards), my aaoa in Sep'20 would be 31 months. 33 during Nov'20 underwriting. Any real difference between 2 years and 2.5 years? Credit age is one of the lower weighted factors, so leaning towards not much of a difference for score effect (probably a 1-5 pt difference).

Message 8 of 9
Highlighted
Moderator

Re: Hmm, positive or negative?

Well, if we're just stating facts, a new account can and will change interest rates.
Even half a percent on modestly priced home adds up to a lot of money over time.

If you add account(s), but your score range doesnt change much, maybe it will be fine, maybe it wont.
Bottom line is, why take a chance on most important purchase over a credit card?

If you feel like going against one of the few facts we know for sure, go for it.
Message 9 of 9
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