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New cards before a mortgage app?

Your FICO® Scores can impact your loan interest rates, terms, approvals and more.
Community Leader
Super Contributor

New cards before a mortgage app?

Scenario:

*  I have 12 cards, very low utilization (1-3%), most cards at $0.

*  My mortgage scores are very good (middle score in low 800s)

*  My reports are otherwise great: Oldest open account is 18 years old, Average Age of Accounts > 8 years, almost all accounts are over 25 months old, 1-3 inquiries per bureau.

*  I have added a new card recently (that has not yet appeared).  Pursuing the signup bonus.

*  I might add one or even two more cards this year, slowly, just to pursue the SUBs.

*  Assume for the purposes here that my middle mortgage score always remains > 761, even with new cards.

 

Question:

Will mortgage lenders really care about the new cards?  (Again, asking whether this becomes a problem even though my score remains high.)

 

Assume that I open no cards between the pre-approval pull and final closing and possession of the property. 

 

The traditional advice is to open no new cards in the six months prior to underwriting, but I am wondering whether that advice is rooted really in protecting the buyer's score.  If the score is fine, do lenders really care?

Message 1 of 13
12 REPLIES 12
Frequent Contributor

Re: New cards before a mortgage app?

It might be seen as Credit Seeking Behavior.
Starting Score: TU 631 - EX 641 - EQ 669
Current Score: TU 716 - EX 731 - EQ 717
Goal Score: 750


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Message 2 of 13
Community Leader
Super Contributor

Re: New cards before a mortgage app?

Thanks Xtra.  And indeed it is credit seeking behavior, for sure.

 

My question is whether underwriters really care about CSB of the sort I described.  I.e....

*  Scores are awesome.

*  No inquiries or new accounts in the 40 days prior to the pre-approval.

*  No inquiries or new accounts after the pre-approval (aside from the inquiries associated with mortgage app).  No inquiries or new accounts appear on reports until well after I own the home and have moved in.

*  Two or perhaps three new cards in the 12 months prior to the pre-approval.

 

Given the great scores and other things, would they actually care about two (or three) new cards over a one year period?

 

Again, thanks to all for any insight, especially loan reps.

Message 3 of 13
New Contributor

Re: New cards before a mortgage app?

I am in the process of buying a house right now. I wish I had allowed the new accounts to age more before starting the process (AoYA 1 month).

While the new inquiries/accounts won't necessarily kill your chances of getting a loan, it will increase the paperwork for you, the loan officer, the loan processor and underwriters.

I have had to write a letter of explanation for every inquiry in the last 120 days (for all CRA's so a capital one inquiry requires 3 letters). All inquiries that resulted in a new account required submitting most recent statement.

I was told that even if I made $1,000,000 a year with an 850 middle score I'd still have to submit this information.
Starting Score: EQ:608, EX:617, TU:625
Score 10/2018: EQ:669, EX:686, TU:668
Score 11/17/2018: EQ:682, EX:681, TU:683
Current Score 12/16/2018: EQ:684, EX:694, TU:689
12/24/2018 -- EQ Beacon 5.0: 678, EX Fico II: 690, TU Fico Classic 04: 716

Goal Score: 740+


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Message 4 of 13
Community Leader
Super Contributor

Re: New cards before a mortgage app?

I will have at the most two new cards in the previous 120 days at any point in time.  More likely I will be applying for a new card every 121-150 days, which would mean only one new card.  If I am hearing you right that would require one letter of explanation and one statement for that card.  Is that right?

 

If so, that's a really low amount of extra work from my perspective.

 

If on the other hand some lenders view this as a problem, I'd like to know that too.  You write that it "won't necessarily kill your chances of getting a loan" -- but that just means it isn't 100% certain to kill my chances.  That's far worse than I am looking for.  I'd much rather hear "most lenders don't care, though you will probably have to fill out some extra paperwork."  But of course I only want to hear that if it is true.

Message 5 of 13
Regular Contributor

Re: New cards before a mortgage app?

A high credit score doesn't make a mortgage application invincible. I am currently in the mortgage process now, and opened a card one year ago and my lender said that REALLY affected my credit date of age. However, every lender/underwriter scrutinizes different aspect of your financial portfolio. Everyone on this forum has encouraged you in some way that it's probably best not to, but you seem to apply a reason to do so -- so if your heart is set on opening a new credit card then do so because it seems like you're pretty adamant about it. But a good rule of thumb is, is it a NEED or a WANT? 

 

My lender looked at my past 24 months (and beyond) worth of movement in my financial credit btw. 

Message 6 of 13
Community Leader
Super Contributor

Re: New cards before a mortgage app?

Thanks!  My comments below in blue.

 


@nguyenlm0629 wrote:

A high credit score doesn't make a mortgage application invincible.

 

That's certainly true.  For example, a person could have a monthly income of $100, which would be enough by itself to shoot down any possibility of a mortgage approval.   Likewise the person could have a really high DTI, which would also be enough by itself to shoot down any chance of a mortgage.

 

So nobody is suggesting that a high credit score by itself ensures any mortgage application.  The question is whether mortgage lenders care especially about the specific issue of a couple new credit cards if the scores are high and there are no other issues outstanding.  That's what I am trying to find out.

 

I am currently in the mortgage process now, and opened a card one year ago and my lender said that REALLY affected my credit date of age.

 

I'm unclear what your lender meant by that phrase.  Did he mean average age of accounts?  (AAoA)   Age of Youngest Account?  (AoYA)  I haven't heard anyone use the phrase your lender gave you.

 

However, every lender/underwriter scrutinizes different aspect of your financial portfolio.

 

I am not certain that is so.  I suspect that in the mortgage industry, much of the underwriting criteria in practice are influenced by Fannie Mae (and its piece of software "Desktop Underwriter").  It's not clear to me at all that there would be huge variability in what mortgage lenders consider important.

 

Everyone on this forum has encouraged you in some way that it's probably best not to, but you seem to apply a reason to do so

 

I am not sure what you mean here.

 

-- so if your heart is set on opening a new credit card then do so because it seems like you're pretty adamant about it.

 

Just the contrary, I am not adamant and my heart is not set.  But what I'd like to do is have accurate reliable information on which to make a decision about whether opening a card in my situation is a bad idea.  Naturally if I knew for a fact that I'd be buying a house in the next 90 days then I'd not open a card.  But I don't know that.  What I want to avoid is losing the $1500 per year in signup bonses that I could be getting just because there is a chance that I might be buying a house in the next 12 months (and therefore based on that possibility I keep skipping over the option of a new CC).

 

But a good rule of thumb is, is it a NEED or a WANT? 

 

Oh certainly it is a want.  Buying a house is a want, not a need -- I could certainly rent for the rest of my life.  That's true for pretty much everyone.  And getting signup bonuses for new CCs is a want not a need.  In fact once a person has a decent income and a good credit score all the issues that come up on this forum are wants rather than needs.

 

My lender looked at my past 24 months (and beyond) worth of movement in my financial credit btw. 

 

Did your lender mean he looked beyond your last 24 months to see whether you had any late payments and other derogs?  That's certainly true -- lenders do that.  But my profile is derog free, thus the ultra high scores.  If you mean your lender looked at something else (not already captured in the score) I'd be curious what that thing was.


 

Message 7 of 13
Highlighted
Community Leader
Super Contributor

Re: New cards before a mortgage app?

If there are any loan officers out there, I'd be most grateful to hear their thoughts!

Message 8 of 13
Frequent Contributor

Re: New cards before a mortgage app?

Credit seeking with 1 percent utl is much different then someone who is credit seeking with 70 percent utl. In my experience it was totally dependant upon the specific lender. Some would argue that a certain amount of credit seeking could be considered a healthy behavior.

 

I am not a loan officer. So I'll go back to sleep now. 

 

Thank you for the scenario!! Look forward to anyone with solid input!

Message 9 of 13
Community Leader
Super Contributor

Re: New cards before a mortgage app?

Thanks so much, Army.  Yeah, my guess is that as long as your other issues are fine (low DTI, few inquiries, 1-3% CC utilization, no derogs, healthy age of accounts, only a small minority of your accounts were opened in the last 13 months, and great mortgage scores) then most lenders would not care if you had opened a credit or two a couple months before pre-approval.  They might ask you to fill out a form explaining why you did it, but that being just a rule and a little bit of extra work -- not because it will affect your approval chances or interest.

 

But that's a guess on my part.  I'd like to hear somebody knowledgeable tell me I am right about that.

Message 10 of 13