@Anonymous wrote:Hi Everyone -
Until recently, I had a 780 FICO score built over 4 years with only a mortgage and one airline credit card. Without much thought, last October, I decided to close my airline credit card (3+ year history) and got a new charge card (Amex Gold) as better suited for my needs. This change caused me to lose a little over 60 points.
In the next few months, wife and I are thinking to:
Refinance mortgage on rental property
Buy our primary residence (we are currently renting)
I'd like to initiate conversations with lenders with the best score possible. Questions:
- How realistic is for me to get back in the 760+ club in less than 6 months? What actions would you take?
- Do I stick with current charge card (and make consistent payments) or open a new credit card and keep utilization below 20% to rebuild credit faster?
- Would it be dangerous for my FICO score to open a new credit card account now if in the next 6 months I will be getting a mortgage?
- Would you recommend refinancing our rental + getting mortgage on primary residence with the same bank at the same time to maximize FICO (and get best pricing)?
Thank you so much!
I think the very first thing you have to do is get a 3 bureau report from MyFICO and see what your 3 mortgage scores are. Not all FICO scores are alike. I just have a strong hunch that your mortgage scores are better than you think they are.
None of the moves you're thinking about would be good, but first we need to see where your mortgage scores are.
@Anonymous wrote:Thanks for your response.
Where do i find the negative reasons for my file? Do i need to purchase myFico report here for $59 to get at the bottom of this?
If i open a new revolver, i plan to keep it forever this time. Ill get a no annual fee card and maintain utilization of 10-20% each month.
Thanks!
Back in the day there was no Fico 8. When Fico 8 score initially became available, a number of "loan only profiles" voiced concern over their low Fico 8 scores relative to the Fico 04 and Fico 98 version counterparts. Fico 8 and Fico 9 algorithms absolutely want to see an open, active revolving account on file.
A 3B report will provide you with a complete suite of 28 scores. That will allow you to see the older version Ficos used for mortgage loans as well as Fico 8 and Fico 9. Some auto loan decisioning is also based on the older Fico models, such as the Auto industry option counterpart. I do think it is a good idea to get a full report at some point in time prior to your loan application. Unfortunately a single report only gives you results for the present time with no prior comparison.
Opening a new account will result in a new account penalty - probably 20 points given your limited file thickness. However, for Fico 8, having an open/active revolver will more than offset the new account penalty - after your 1st statement with a balance and payment is reported. Not sure how all this will balance out with the older Fico "mortgage" algorithms. My guess is the net impact on mortgage score could be -20 points to +30 points - assuming the card reports a low utilization.
Check your mortgage Fico scores now - if the middle score is 760 or above, hold off on opening any new revolvers until the loan is processed. If it is 731 - 759, consider getting a card now. If score is 700 to 730 hold off on a card.
As a long term strategy, it is very important for credit purposes to have and maintain revolving credit. Loans come and go but, with revolving credit cards you can maintain continuity by keeping a card open and in use indefinitely. When you do get a credit card, have it report a balance in the 1% to 9% range (as opposed to 10% to 20%). You would experience a non trivial score penalty if utilization reports in the 10% to 20% range. Note: For a single card aggregate utilization = individual utilization.
As Jamie suggests, having multiple credit cards it better than just one. It provides added safety and flexibility. In the event one card is closed for whatever reason, you would still have a revolver available for use and showing on your profile to boost credit score. That being said, I would recommend opening one revolving account, at most, until after your loan has been processed.
Edit Add paste below: This table is from 5 years ago. The rates have come down but, the score thresholds should still be ok.
@Anonymous wrote:Thanks for your response.
Where do i find the negative reasons for my file? Do i need to purchase myFico report here for $59 to get at the bottom of this?
If i open a new revolver, i plan to keep it forever this time. Ill get a no annual fee card and maintain utilization of 10-20% each month.
Thanks!
1. Unfortunately, in order to find out what your mortgage scores are, getting an up to date 3-bureau report from MyFICO, at their super-high prices, is the only method I know.
2. If I were applying for a mortgage in 6 months, I would be going for the $40 month monitoring package so that I could get updates on the mortgage scores monthly, or experian.com's $25 month package which gives you daily updates on the Experian mortgage score.
I think the $240 + tax you would spend on the MyFICO product, or the $150 + tax you would spend on the Experian product, are pocket change compared to the difference you could save in mortgage interest.
@SouthJamaica wrote:I think the $240 + tax you would spend on the MyFICO product, or the $150 + tax you would spend on the Experian credit, are pocket change compared to the difference you could save in mortgage interest.
This ^^^ . I think all of the above responses are spot on, but this here that @SouthJamaica mentioned about the reports vs interest is key in the beginning. You want to see where things stand first to set things straight and go from there. Plus the benefit if this can save you a bunch in interest as pointed out, which would be a huge benefit to you.
