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Credit Needed for Best Mortgage Rates


Credit Needed for Best Mortgage Rates

I am looking at getting into a house in 12 - 18 months.


I've cleaned up my credit a ton in the last 6 years and I've only got 3 Charge Offs left that will be falling off in about 9 months. 


Right now my active credit lines are thin.  I only have a $550 limit Orchard Bank card (with a monthly fee) and 2 student loans totaling about $4,500.  My other accounts have all been closed for 3+ years.


I would like to get a few credit cards now so that I can kick the Orchard Bank card to the curb and most importantly get some cards reasonable limits.  However I don't want this to hurt my chances of getting approved or the rate I get.  I want to get the very best rate possible. 


I currently have the following:
- 3 baddies (Charge Offs) - 6+ years old (I can't wait til they fall off!).  9 Months left to go.
- 1 low limit Orchard Bank account (now Cap One)
- Student loans in good standings (no lates)
- 1 Auto Loan (Paid 3 years ago, 30 days late twice in a row)

- FAKO 700 - 730 across all 3.  683 Fico but one CO/collections from 3 years ago was removed since then so it should be close to 700.

- Average age of accounts is 8 years


Goals in the next 1 - 1.5 years:
- Mortgage - I will have at least 10% + 10k for any fees or other stuff.  Income $75,000.  House around $250,000.
- 2-3 high limit credit cards


Should I look at getting 1-2 credit cards now or just tough it out and wait until I close on my mortgage in 12-18 months?

Message 1 of 4
Valued Contributor

Re: Credit Needed for Best Mortgage Rates

Your score determines how deeply underwriting looks at you, and your rate.  But you'll still be put through underwriting either automated or manual, which will be where your lates are looked at.  Two 30 day lates three to four years old should be having minimal impact on score and should n't be a hindrance in underwriting.


If you are going to take on new credit card debt (whether you use the lines or not) I would do it now.  If you have no inquiries and no new debt within the past 12 months that will help with both score and underwriting.  Having two or three prime credit cards with a year of positive history should help.  But be judicious about applying, don't risk inquiries in search of cards. I would start with your bank or credit union, go in and talk to a human, see what they can do for card(s).

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
Take the FICO Fitness Challenge
Message 2 of 4

Re: Credit Needed for Best Mortgage Rates

I just wanted to say thanks to Chasmith.


I got two credit cards.  One with Amex.  They gave me $2,500.  Then I did the 3X CLI and got it to $7,500!


Then I applied for a Capital One Rewards card (prime) and they gave me a $10,000 limit right off the bat!


I am so excitied!


I also kicked that crappy $550 Orchard Bank card to the curb.


To top it all off my credits better than it's ever been at 750+ across all CRAs!

Message 3 of 4
Established Contributor

Re: Credit Needed for Best Mortgage Rates

That is great news Bill. Awesome news. Are you still trying to apply for a mortgage? Sounds like your application for a home loan should be a breeze!

BK in January 2008---Barclay's Apple Financing Card ($10,000) --- Capital One Quicksilver ($13,000)--- Platinum Delta Skymiles ($35,000) --- GEMB CareCredit ($10,000) --- AUFCU ($10000)---Discover IT ($33,000)

Experian 827 Transunion 828-- Feb 2018
Message 4 of 4