Help! How to build a thin credit file ?

[Anonymous]

Okay, so I’ve been busy since I joined in Nov 2014. I’ve followed through on the great advice on the forums and this is where I am in less than 60 days.

My goals are to get a house and maybe a car this year. 

Current Scores

Equifax/MyFico 663

Transunion/MyFico 665

CreditKarma 595

Experian/MyFico 649

I have a super thin credit file and fixed income. I would really appreciate advice on which specific cards, mortgages, auto loans I should apply for right now.

Income: Disability + Backpay 2015 $30,000 

Good Accounts

• Credit Union $500 Visa Approved 12/23/14
• Student Loan Debt $80,000 deferred 2016
• Fingerhut, Approved 11/2014 unused
• Credit One Secured - Approved, unused
• No charge offs or lates

Collections 

All Withdrawn, in process of being dropped

• Enhanced Recovery - Fraud Account $263 Removed 12/5/14
• Stallings Medical $1304 - Medicaid Retroactive, Removal In Process confirmed  1/12/14
• Stallings Medical $1359 - Medicaid Retroactive, Removal In Process confirmed  1/12/14

Inquiries

6 

Credit Cards Applications

Walmart Store Card 12/31/14 - Denied

Too many inquiries, collections

Capital One Quicksilver 8/14, recon 10/14 - Denied

Too many inquiries, collections

Cards & Loans I am looking at:

• Barclays / Apple Card
• Any non-secured Visa or Mastercard
• Mortgage Loan: Wells Fargo or Credit Union
• Auto Loan: open

Questions:

• Will the drop offs on recent collections hit me negatively with a thin credit file?
• I am crashing and burning with the banks so far, what is the alternative easier applications for newbie / thin credit file besides credit unions?
• If I am doing a mortgage loan, should I do 3 or less credit cards, auto loan, secured cards with my income amount?

Any thoughts?

Thanks for the assist.

[Anonymous]

Per my understanding either auto loans or mortgages will need to see at least 24 months of history to approve you. I could be wrong but I am in the same boat as you are since my first TL is since 10/2014. Super Thin File as well. Other people should jump in and verify this. I will really mantain my sight in building a healthy file and as soon as you receive pre approvals with decent rates that will show its a good time to start your auto/house hunt. I have seen a lot of people gardening for up to 2 years prior to applying for a mortgage to have their Credit score as attractive as possible.

[Anonymous]

Questions:

• Will the drop offs on recent collections hit me negatively with a thin credit file?
• I don't see why collections falling off would negatively affect any credit file.  Better (to my understanding) to have no collections than any collections!
• I am crashing and burning with the banks so far, what is the alternative easier applications for newbie / thin credit file besides credit unions?
• A lot of inquiries in a short amount of time can signal two things: 1) You're either really hurting for credit or 2) Fraud.
• Cool down on the requests for credit for a bit - build your profile out and wait 6 months.
• If I am doing a mortgage loan, should I do 3 or less credit cards, auto loan, secured cards with my income amount?
• Trade lines are considered, but not highly important.  The big thing is the size of the credit limit(s), age of accounts and your Front/Back End Debt to Income ratios.
• You can obtain a mortgage without your credit score; for people on fixed incomes, working with NACA can be fruitful as they will work with you and their lenders for "character lending" instead of on credit score alone. 
• FHA is the first stop I would take on this train though - 620 requirement for 3.5% down on the home + you may qualify for down payment assistance.  FHA guaranteeing the home against default helps the lenders loosen up their requirements to get a mortgage. 
• Mortgages can be tough because they need to see some expectation for the long-term that your income will continue (years of mortgage business experience speaking here).  I see you noted backpay 2015 - what happens at 2016 - where does your income adjust to?
• Could disability alone pay a 31%-43% Mortgage Payment (PITI+A) in your area?   Market Prices are different; you may have to consider a move to a cheaper area to satisfy this dream if your income doesn't fit the market prices in that area.
• Your Back-End Debt Ratio (all other monthly debts/expenses + mortgage payment) cannot exceed 55% your total gross income. 

Hope that helps with your mortgage efforts.

Any thoughts?

Thanks for the assist.

[Anonymous]

In case you aren't hip on Mortgage jargon, PITI+A is Principal, Interest, Taxes and Hazard Insurance (+ Association Dues, if applicable)  -- the "standard" is to have a payment below 31% or between 31% - 43% of your gross income each month.

[Anonymous]

You are right about the inquiries. It's hard though. Especially since my credit score jumped 40 points with adding just one card.

I actually got through on Barclays today, then they pulled the approval 30 minutes later. Now I'm working on that recon and Cap One as well. I'm sticking to local credit unions after this.

Great point on income and DTI ratios. I've already figured that out. The house I want is a fix-up in an up and coming neighborhood so I can afford it even if I dont go back to work next year.

Thanks for the NACA info. I will check them out. I am already working with a similar agency in Atlanta. The scores I have qualify me for the FHA option with downpayment grant and/or assistance.

I just need to take the leap and do the mortgage pull now. I was hoping to add at least one more card / line before I do that.