@Anonymous wrote:Okay, so a couple of months later down this road here is where I am now:
Built my credit scores, all are at 730-750 now
Added a secured installment loan 6 months ago as per your suggestion. Scores went down a little bit but came back higher a little later.
Citi secured automatically returned my deposit after 10 months without asking. Then increased limit from $2k to $2,5k without asking. (I paid 100% each month using autopay and never used more than $50-$80)
I recently applied for a mortgage and I was able to fund and close. It was a nightmare but this country seems to allow you to buy money with money.
So I now have an installment loan (5 months to repay), one citi CC with $2,5k and a new mortgage which got not yet reported.
My guess is that once the mortgage reports the scores will drop again.
Does it make sense to apply for one or two more creditcards now before the mortgage reports? Or wait? Should I ask citi to increase my limit? I do have a german AmericanExpress - they would allow me to transfer the card to the US. I am uncertain if it makes sense to do that or keep that one reporting in Germany.
Thanks again for your help...everything seems to work out so far with the help of this forum :-)
Oh WoW, Hi Andres! You've made incredible progress in such a short amount of time - congratulations - I'm so happy for you!!! Home purchasing is a nightmare for everyone -- studies show it's the most stressful purchase Americans deal with in their lifetime - so, welcome to the club!
Yes, your scores will drop a bit when the new mortgage reports but it will recover with time -- having a mortgage reporting is a huge asset so long as it's maintained well so you'll ultimately have a much stronger profile.
I would probably go ahead and app for new cards now before the mortgage reports. The mortgage showing probably won't have an effect on approval odds, but it may affect the starting credit limit due to your new & increased debt - overtime, this will not be an issue as you show you can manage the debt.
If you are eligible for a Citi CLI, then yes, ask for it -- you can do so on their website (every 181 days) and it may not even require a hard inquiry of your reports because they often offer the option to request a credit limit increase based on a soft pull which will not affect your scores.
As far as keeping or transferring your German Amex -- I honestly don't know which is best. Will amex allow you to have both a US and Germany based card? If so, then perhaps just app for a new US based card and keep other as well?
One more thing -- after you app for your new cards, and your mortgage reports -- you will need to sit on your hands for a while and let your accounts age (Garden). No apps, no new inquiries for at least 1 year. This will allow your credit profile to stabilize and regain all of the lost points from new account and inquiry penalties.
So, take the time to think about and research the cards for which you want to app and make sure they will offer long term value for your lifestyle (whether it be travel rewards, cash back, low APR card, balance transfers, etc.). You may also want to consider joining a local credit union - they heavily value relationships and tend to take care of the consumers; they are usually great to have in your corner for things like auto loans, personal loans, low-rate credit cards, savings, financial/retirement planning, and so on.
@Anonymous wrote:Awesome! Thanks again for your help :-)
Is your recommondation to get one more CC or better two more? People here seem to have 10-20 CCs, does that help? I tend to get my amex transferred as that might help to bump the CL from the get-go as they might take my german history I got with them into consideration. I will still have one card reporting in germany with my business as well as three mortgages, so that should be fine.
More does not equal Better in the world of credit. For optimal FICO scoring, you only need 3 revolving accounts and 1 installment loan to fulfill all the FICO scoring categories. Of course -- people obtain more than that over time for various reasons - but that, and time/credit age, is all you need to build a solid profile.
You don't want to add too many new accounts at once -- it will kill your score because your profile is so young and thin. Even if you plan on gardening for a year -- you never know when you may need to apply or qualify for new credit due to an unexpected circumstance and you don't want a bunch of new accounts and inquiries to be the reason for denial or poor lending terms when you are actually in need of some type of credit.
In your case, I'd suggest getting no more than 2 new credit cards at this time. Then let all of your new accounts and inquiries age to at least 1 year before applying for anything else. Once everything is 1+ year old, you can begin adding 1 new account every 6 months until you are satisfied.
Beware of the number of inquiries you accrue on each bureau -- too many will hold your scores down for a full 365 days. Once they age to 365 days, they become unscoreable so you will regain any lost points at that time, but they remain visible on your reports for a full 2 years. I see a pretty significant scoring hit on my profile (~20 points) when my number of scoreable inquiries (less than 365 days old) are more than 4 -- the effect of inquiries is profile specific so the effect varies for everyone.
Also consider rules of certain creditors -- do your research before applying - this forum is a great place to learn about a specific lender.
For example:
- Chase has a 5/24 rule for applicants. This rule means that they can deny you credit - even if your overall profile qualifies - if you have 5 or more new accounts opened in the last 24 months. *This rule may be bypassed if you are an existing Chase customer and they offer you a pre-approval through your consumer portal or at a branch location.
- Citi can be inquiry sensitive. 3+ inquiries within a 6 month period can end in a flat out denial for a credit limit increase on an existing Citi account.
Each card issuer has a thing, so keep that in mind when applying. If you follow the 1 card every 6 months rule, you'll be able to avoid declines based on those 'credit-seeking-behavior' type reasons.
Also remember -- age of accounts is important. Be mindful of your Average Age of Accounts (AAoA) -- you want that to age to eventually make it past the 3 year mark and either stay there or (hopefully) continue to increase. Each time you add a new account you reduce your AAoA. You can calculate your AAoA by finding the average of all accounts, including closed accounts (ie. add up the age of each of your accounts - in months - and divide that by the number of total accounts and revert that number back to years). You want to strive to have the age of your Oldest Account (AoOA) and your AAoA as high as possible as these are big scoring factors and help determine the overall strength of your credit profile.
Also try to avoid credit sprees (applying for 3 or more cards at once) while your credit is young -- it takes a long time to rebound. As your profile thickens and ages, it'll be able to better handle more new accounts in a short period of time and creditors are less likely to view it as a negative on an aged, thick file with solid payment history.
@Anonymous wrote:My goal is to get some more mortgages, maybe 2-5 in the next couple of years so a good CH will hopefully help me to get low interest rates...
General Rule of Thumb: No new accounts or inquiries at least 6 months prior to applying for a mortgage. So plan accordingly.
Amex charge cards do report to all 3 bureaus. Their balances are just not calculated into util because there is no set limit. But they report and update balances every month, just like their revolvers..
@Citylights18 wrote:The problem with AMEX cards is most of them are charge cards and don't report.
Yeah, not disputing your suggestions, just wanted to clarify the point about reporting to avoid confusion since history is something OP needs to build and they're still fairly new to American credit.
@Citylights18 wrote:
Yes. I was meaning that you don't get a predefined credit limit to help increase your total credit line which drives utilization.
@Anonymous wrote:Thank you guys! I am not sure if I am more confused now :-)
1. Should I apply for new CCs at all? Generally speaking I don't like credit for anything else than homes or investments - so the only reason I am doing this is to build a strong credit history to get loans for my houses. I don't want to have cash back, points, rewards or anything like that and I buy my cars and everything I consume cash. I always have a a minimum of 12 months emergency reserve and we keep our spendings way below of what we earn. Mr Money Mustache :-)
Sorry if the lasts few posts were confusing, Andres -- it's a lot to take in.
You don't have to apply for any more personal credit if you don't want to. As I said in my last response to you, for optimal FICO points, you only need 3 credit cards and 1 installment loan - but you can still obtain high scores with 1-2 credit cards. This is your choice - do what makes you most comfortable. History is most important to building a strong profile, so as long as you maintain your accounts with a perfect payment history and allow them to age, you'll be fine.
@Anonymous wrote:
2. My credit builder installment loan will close out in about 5 months. I asked the bank already and there is no way to keep that open other than applying for a new one. Will the mortgage replace the installment loan requirement on my credit?
You do not need a new builder loan to replace the current one once you pay it off. Your mortgage loan will fulfill that piece of the FICO category. Once your mortgage reports, you could even go ahead and payoff the builder loan early if you want - just make sure there are no early payment fees associated with paying it off too soon. The record of the paid/closed loan will remain on your reports and continue to factor into your credit age for up to 10 years after closing.
@Anonymous wrote:3. I do have a business where we have a lot of spending each month especially in travel expenses. Maybe it would make sense to get a CC for my business instead? My bank does not offer secured cc for business so I wasn't able to do that in the past.
Yes. It sounds like business credit may be a better avenue for you to pursue. I don't know much about business credit, so I cannot offer advise on how to get started -- but there is an entire sub-forum for business credit here -- you should post any Qs you have in that section so others more familiar can assist.
@Anonymous wrote:
Is it verly likely that I will get approved for CCs now that I have scores above 700 and my oldest account is over 12 months old?
Yes. It is likely you'll get approved with most major banks with your current profile since your income also appears to be more than sufficient. Just understand that your approvals may not come with the highest starter limits because your file is still young and quite thin. You may have to build your limits through future increases. It's always a good idea do your research on lenders (this forum is good such data points) before you apply so you can get a feel for what they are looking for and whether or not you'll qualify.