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Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

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csementuh
Member

Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

Hello all. I am a 25 year old male who is looking for a little credit advice. I have made a few life changes recently and I really need some help on what to do next...

 

Stats...

Salary: $56,500, Part-time job for fun another $2k a year
Equifax FICO Score:  778
TransUnion FICO Score:  759
Experian FICO Score:  762
Auto-Enhanced FICO Score: 784

 

First the house and car... Then the student loan info...

 

I close on a $120,000 house April 28th. I already signed the commitment letter (FHA Loan, 30yr, 4.75% fixed, $116,850 borrowed), and I should have one additional soft pull this Thurs the 21st. My credit score has actually gone up since I first made mortgage app and there is no other conditions, so there is bascially no way I won't be

getting this mortgage/house.

 

I traded in a vehicle and bought a newer car at the end of December 2010. I financed it through the same company, Ally Auto (GMAC) I had the prior car through, however there was one inquiry from another local bank they ran as well. Loan was for $30,499.14, 72 months, 4.75% on a 2008 Cadillac CTS4.

 

Student loans... I owe AES $18,300 with pretty low interest rates on the gov't loans (most 2%, a couple 6%). I owe Wells Fargo $43,100 with their 'best' rate of 9.25% variable. Wells Fargo is horrendous, and I know I will have to start socking a ton of money at those loans to ever pay it off... Once the AES loans are gone, I will put that extra into the Wells Fargo loans. I consolidated my supplimental private loans with Wells Fargo a few years ago, but does anyone know if these can be refinanced another way to get a reasonable interest rate, or am I stuck since they are private loans?

 

My 'rated expenses' that factor into DTI are a hair under $2k a month now with the mortgage. After 401K and benefits deductions I clear a bit over $1500 biweekly. I'm still doing OK with the bills. My long term GF will be moving in with me and giving me probably about $500/month 'rent' to help out.

 

Soooo, my questiona are this... What can I do to better increase my financial picture? Right now I have taken on a lot of debt, and I know this can be good/bad. I really want me credit score (Equifax monitored by myFico is fine) to reach the 800 club! I've gotten it to 789, but it fell back down to the current 778 after a credit card reported

 some balance before I paid it down.

 

This brings me to question number two... I have good credit, make good enough money, and I really want to have some better credit cards. I have a Merrick Bank Visa with a $3,600 limit, 24.45% interest rate, and a $48 a year annual fee. Not great lol. Merrick has given me more credit over the years, but stopped about two years ago for some reason. (EDIT: I asked them for an increase and they don't do user requested increases, only every 6mo reviews.) I also have a Citibank ThankYou Network MasterCard with a $1700 limit (EDIT: Credit limit is now $2700 after they gave me an instant $1k increase with no credit pull. This will help my util a lot), 18.99% interest rate, and no annual fee. Little bit better, but not great. Soo, my current dilema with the whole house thing is that I will need to utilize more credit than usual and pay it off within the new couple months. I almost always have my cards paid off. The utilization rates are going to hurt my scores... The Citicard having such a low limit, already reported a $500 balance and hit my Equifax score 11 points. I feel I should have some higher limits to be able to responsibly utilization my cards as needed and then pay them off. So should I simply ask for credit limit increases with the crappy cards, or try to get better cards? My Merrick card has $1k on it right now, and I am hoping I can get it paid down a bit before it reports a sizeable balance and I take another hit. Really needed a washer and dryer though lol... Do I need to keep it under 9% utilization, or is under 30% good enough? How about individual card utilization versus combined total util? What's the sweet spot..?

 

My biggest problem is the impact on my credit. Car, House, Cards, BAM!, sounds like credit score disaster... I don't want to kill my average age of credit closing accounts and/or opening new ones, but I don't want stuck with bad cards forever. I don't want to have more inquiries that will lower my score since I just had one for my auto loan at the end of December, and another one for my mortgage in the middle of March. What is the 'best' option..?

 

The other kicker is that I may need to use some credit briefly for an engagement ring around early/mid July. ;-) I will have some more money saved by then since the closing costs on my house are taking a good chunk of my savings, but I will likely need to juggle my liquid assets a bit, and I would prefer to charge (most if not all) of the ring, and then strategically use my savings to pay it off briskly. That would mean wayyyy tooo muchhh credit card utilization. The other option may be to open up a store card, personal loan, or other line of credit to get the ring. That would be an absolute last resort, but I suppose sometimes in life you need to make

sacrifices, and my credit would recover from the hit soon enough, and it may even help something? I'm really planning on paying cash/credit for a short while though. I will likely delay the engagement if I can't swing it directly then. But IDK because I'm trying to be fair and think of others instead of myself for once lol. She's waited 3 years now already lol.

 

Yea, talk about bad timing... I have the sudden need to spend a good amount of money in a relatively short few months. Closing costs and equipping a house with furniture and appliances sure isn't cheap! These things were kind of just situational, and I need to be responsible and make the best of things. I know I will pull through just fine...

 

Advice please!!! Sorry for the long post! =)

Message 1 of 12
11 REPLIES 11
csementuh
Member

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

30+ Views, certainly somebody could add something of value..? Please!

Message 2 of 12
llecs
Moderator Emeritus

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

LOL! I was probably 5 of those and w/ work getting in the way, I had to back off.

 

The new credit is a score-killer. However, if you remain app-free for a year after you close on the home, then I'd expect your FICO scores to tick back up. And don't apply for any new credit. If 800 is important, I'd give yourself as much time as possible to reach that goal. I don't know your current AAoA, oldest TL, etc., but try to be app free for a couple of year at least after your mortgage.

 

For best results, pay the loans and mortgage as scheduled. Know that there is a difference between revolving util and installment util. Installment util is such a very tiny part of FICO scoring that it isn't worth worrying about. That's why I say pay as scheduled (or pay off early to save on interest if you want). In other words, if you paid off all your loans now, you really wouldn't see any score movement at all. Now revolving is different. That's a very big part of FICO scoring. FICO scoring is a snapshot in time and while 30% utilization no your CCs is high and is a score-dinger, there's no lasting scoring impact. If you paid them down to close to $0 tomorrow, you'd regain all of your points. For max points, pay all to $0 except for one and get that one to report a balance of under 9% of the CL. Adding more CCs or replacing CCs would result in a year being added to your 800 goal, IMO.

 

If I were in your shoes and an 800 is more important than CCs (or new credit or high util for a ring, appliances, etc.), then I'd strive for the 800. Within a couple of yours, or less, I'd expect it to be hit and then I could apply for whatever or replace whatever and then rebuild the score once again.

 

 

Message 3 of 12
csementuh
Member

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

Thanks for the response! LOL, I appreciate you taking the time to read my scenario.

 

If I understood you correctly, if I want even better credit now, I'm SOL for awhile, and I can't buy much now. I'd have to be very meticulous for a year or two to hit my 800 goal. However if I don't mind temporarily sinking my score a bit, I can utilize my cards, and my score should rebound when the util drops down into the proper range? Right..? (Using my existing credit now seems like the smarter choice as the scores will recover once util is back down...)

 

The desire to have an 800+ credit score is nothing more than a simple desire. I can already get the best rates on things with my current scenario, so it is not 100% necessary. What is more important is living life comfortably and taking care of the things that need done now.

 

Basically I want to know what tactic I should use concerning my credit cards. Should I continue to pay for poor quality credit cards, or would it be worth it to invest in something better? What are the best cards? Surely with my high credit scores now and good income, etc, I could qualify for top-tier cards, no? This may be something to look into within the next year or so... I read that closing credit cards doesn't hurt your AAoA's, so I think it might be worth a try to get rid of the bad cards and get something better in the future... If not, can I call the credit card companies I currently have and ask for a better rate or better terms such as no annual fee? Would they possibly do that for their 'best' customers?

 

More importantly, I have the $2000 worth of credit card debt I will wrack up now, combined with the $3-4k I may need for a ring within a couple of months. How can I best manage this debt? Obviously I will pay it down/off as briskly as possible, but it will be slower than normal due to all of the expenses of buying a house. Should I ask for credit limit increases on my existing cards and hope to get a higher limit that will keep my revolving util lower until I can get it paid down? Is the credit inq on a credit increase a hard or soft pull? Is the hit with another hard pull from an existing card worth it? I certainly think a higher limit would give me more 'breathing room' until I have the balances paid off within a few months. Righ now I think the limit increases are my best bet, and will bring my util down, which should allow my score to bounce back up to the high 700's where it belongs, am I right?

 

Are these questions something a 'financial planner' or someone local could answer for me?

 

Thank you!

Message 4 of 12
Anonymous
Not applicable

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

And remember, too, that any FICO over 760 will likely qualify you for the best rates.

A FICO score of 760-850 gives you a 90 point range to work in and still be considered as an "Excellent" FICO scoreholder.

 

I'm not sure that 800 will get you anything that a 775 or a 762 won't.  Hopefully others will chime in if their experience is different.

 

 

Message 5 of 12
csementuh
Member

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

Thanks for the advice! I agree you with wholeheartedly. I was able to get the best rates on my used auto loan, and this mortgage I'm closing on soon. The '800 club' was mostly just for my own financial pleasure lol. But you're right, not much more to be gained once it is a bit high.

 

I am still torn on what to do now though. I hate to see my scores take a plunge, even if only temporarily... I guess they will have to though, because I will need a couple of months to juggle money around and pay for all of the things I currently need for the house. I just hope I can get the card balances paid down ultra fast and my score quickly recovers (hopefully even higher).

 

I am really curious to know though if I can safely get some credit limit increases to pump my util down however. That would be a livesaver and allow me to responsibly play the util % game util the cards are paid off, and give me some more leeway for another big purchase. So the question remains, will a credit limit increase be a regular inquiry and ding me good, or is it more of a soft pull since I already have credit with the CC company?

 

I would however like 'better' credit cards eventually because these cards leave a bit to be desired. I guess I can just wait on them though. I usually pay the cards off so briskly that I rarely pay much in interest despite the super high rates. My rates have been that high since I've been 18 and had little credit.

Message 6 of 12
llecs
Moderator Emeritus

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

There's a rule of thumb that 70% of us probably break (present company included) and that is apply only for the credit you need. There's nothing wrong with weeding out the CC garden to remove cards due to annual fees. They won't be factored into utilization once closed and $0, but you'd save on the AF and they'll still factor into your AAoA and length of history for up to 10 yrs. Now doing this won't get you closer to 800, but if the goal is to have better CCs, then go for it. If you do replace cards, I don't recommend doing it all at once though. Stagger it every 6-12 months. BTW, if you PIF monthly, your APR is 0%. Something to keep in mind. For new CCs, other than maybe some CUs or introductory offers, a rate of 14%+ isn't unreasonable. Read in "Credit Cards" to get everyone's 2 cents on what the best card is. It varies based on your goals. IMO, my Amex is my fav card because I have to PIF monthly, there's no interest, and it gets me on the habit of paying my other CCs in full too. Someone might say Citi. Someone else might say Discover. Someone might say Chase. There are varying opinions.

 

You can ask for an APR reduction, but many CCCs aren't that receptive. Again, PIF the higher APR -cards and your APR goes to 0%. I have a couple of cards at 30% and pay no interest on them. Same applies for the AF, but that's tough to get removed.

 

Asking for higher CLs will help util if they approve it and that can help the score, but if the balances increase, then you are back to where you were before per util. YMMV based on the creditor. Some will pull your credit and some will not. If Ihad a house purchase pending, I wouldn't app for anything and I would hoard cash. After closing, then I'd take a look at the home and do any necessary repairs w/ cash (e.g. new appliances, new wiring, new plumbing, etc...I'm going through this now) and pay the minimum amounts on the CCs and would avoid using them at all. After I'm satisfied that I didn't buy a money pit, then I'd throw all excess cash at the debt with the revolving first. You'd be surprised what comes up. We are over budget by about $10k on our house because there were some items needing repair that didn't come up in the inspection. The inspector warned me there may be some pending issues, but sometimes time is needed to see if there are real problems.

 

 

 

 

 

 

Message 7 of 12
llecs
Moderator Emeritus

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!


@csementuh wrote:

I am still torn on what to do now though. I hate to see my scores take a plunge, even if only temporarily...


 

I was thinking of analogies...if you have a goal eating healthier and also have a goal of eating at McDonalds twice a week, then both are goals, but both conflict. Both goals cannot be accomplished at the same time. Same way with the score. Adding new credit will result in a ding so adding new credit to reach 800 won't work. Both goals are polar opposites.

 

Message 8 of 12
csementuh
Member

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

Thanks for the further advice. I am pretty certain I am going to try and ask the credit card companies for a limit increase and also see if I can threaten account closure for a lower APR. I have been with both cards for about 7 years, so I am hoping I can at least get a rate increase. I haven't gotten an automatic limit increase in years despite tripling my income in the past several years. I am going to ask if a credit pull is needed, and then only try for the rate increase if a pull is not needed.

 

I've read that Citi allows for an automated online limit increase, and as long as it doesn't ask you for more info, it may give you a limit increase without a credit pull. I'll try that first....

 

EDIT: The Citi online account asked for a credit check for the increase. I called Citi on the phone and they gave me a $1000 credit limit increase to $2700 total. I still feel this is absurdly low for my income and credit scores, but I guess an extra $1k of util help is golden! I may want to try for an increase after I close on the mortgage. I don't see a reason why they wouldn't give me something better, but I'm not so sure the inq is work the increase, unless it's substancial. Citi seems to be a good card, so I'll likely keep them around for a good while. I called Merrick Bank as well, but as usual they are trash... They only offer account reviews every 6mos, no user requested increases, lower APR's, and they won't waive my annual fee. Ohh well, they currently have my highest credit limit, so I'll have to keep them for awhile and hope for the best next review...

 

If a credit card company needs to pull for the increase, is it the same inquiry hit that opening a new card or other loan would be? Just trying to weigh the pro's and cons of getting an increase versus having util ran up vs my score going down.

 

Basically, I'll give up on the 800 goal in the immediate future, and instead focus on paying this debt with the least impact to my score. I need my score to stay high, so I want to try and not impact it as much as possible, and then pay off the cards to get my score back up where it belongs. Once that happens I'd imagine I'll be pretty damn close to 800, as I was at 789 just a little while ago. I've also heard that the mortgage can raise your score a bit having a better 'mix' of credit.

Message 9 of 12
Anonymous
Not applicable

Re: Young Man Needs Credit Card Advice After Car, Mortgage, etc, Need to Keep Good Credit Good!

You also may want to consider going for a CU CC that is noted for high CL's.  If you open that account before your utilization climbs, it will be a big help.  Alliant comes to mind, and there are several others that folks on here like. 

 

In addition to all the above, there's always the option to take it easy on purchases after buying your home.  Purchase used appliances (I have a lovely used front loading washer and dryer - my second set - the first used set lasted a decade and half of it was still going strong).  Consider used furniture.  Not every thing has to be new, and not every purchase has to be charged only to be paid back later.  Decide what things you can do on a budget - paying cash as you go - without incurring debt.  Going without a few things for a little while still works, too.

 

Best wishes to you on everything!

Message 10 of 12
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