Open an SSL?

[Anonymous]

Greetings all!

I have about 5 credit cards and no other open credit. I had an installment loan which I paid off in 2016. My EQ5 has varied between 740 and 770 this year as card balances have fluctuated. I have no lates or derogs on my record, and no inquiries or new accounts in 2+ years. Two of my cards have high utilization which I have begun paying off. I'd like to get a mortgage 2 years from now, and was thinking of opening an SSL now to add some safety margin to my score. But, maybe it's unnecessary and once I've paid the cards to zero, my scores will stay high enough without an SSL. What are people's thoughts?

[sznthescore]

Specifically how long have you had your credit card accounts? Obviously longer than two years, but having an installent loan (SSL) would help your scores showing a healthy credit mix. Paying the loan down to 8.9% would optimize your scores even better imo. Do this atleast 6 month before applying for your mortgage.  The sooner the better to allow the accout to age a bit.

[Anonymous]

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@Anonymous wrote:

Greetings all!

I have about 5 credit cards and no other open credit. I had an installment loan which I paid off in 2016. My EQ5 has varied between 740 and 770 this year as card balances have fluctuated. I have no lates or derogs on my record, and no inquiries or new accounts in 2+ years. Two of my cards have high utilization which I have begun paying off. I'd like to get a mortgage 2 years from now, and was thinking of opening an SSL now to add some safety margin to my score. But, maybe it's unnecessary and once I've paid the cards to zero, my scores will stay high enough without an SSL. What are people's thoughts?

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Some points to consider:

1. Mortgage scores (5, 4, and 2) are sensitive to number of accounts reporting a balance. An SSL would be an additional account reporting a balance.

2. The closed installment loan satisfies the credit mix portion of your credit score.

3. New accounts will affect mortgage scores for 18 months, keeping you in the new account score card and potentially limiting your highest possible score.

4. At the low end of where your score has been reporting (740) you should still qualify for great rates.

5. Whatever the payment is for the SSL will count against your DTI, even if you have paid it down to <8.9% (which will mainly benefit FICO 8 scores) and don't have a payment due for a while.

If it were me, I wouldn't take out the SSL. I just don't see enough benefit from it, your mortgage scores are likely to benefit from implementing AZEO and maintaining it during your approval process.

[SouthJamaica]

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@Anonymous wrote:

Greetings all!

I have about 5 credit cards and no other open credit. I had an installment loan which I paid off in 2016. My EQ5 has varied between 740 and 770 this year as card balances have fluctuated. I have no lates or derogs on my record, and no inquiries or new accounts in 2+ years. Two of my cards have high utilization which I have begun paying off. I'd like to get a mortgage 2 years from now, and was thinking of opening an SSL now to add some safety margin to my score. But, maybe it's unnecessary and once I've paid the cards to zero, my scores will stay high enough without an SSL. What are people's thoughts?

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The SSL wouldn't help your mortgage scores, and would show up as a new account. So definitely don't.

[Anonymous]

Thanks for the comments. Oldest card is from 2013 and newest is from 2016, so my AAoA isn't so great. I understand an open installment loan is no better than a closed one for mix of credit, at least for EQ5. But what about score boost from having an installment loan at <8.9%?

[SouthJamaica]

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@Anonymous wrote:

Thanks for the comments. Oldest card is from 2013 and newest is from 2016, so my AAoA isn't so great. I understand an open installment loan is no better than a closed one for mix of credit, at least for EQ5. But what about score boost from having an installment loan at <8.9%?

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Mortgage scores don't care much about that.  But they do not like accounts with a balance.

IMHO you are in a great position, not having opened a new account in the past 5 years. Mortgage scores love that. Don't blow it.

And who told you your AAoA isn't great? It is great.

And why on earth would you think that adding a new account would help your AAoA? It would bring it down, not up.

Please don't touch a thing.

The thing you need to concentrate on is getting your utilization down. Let all but one of your revolvers report a zero balance, and let one report a small balance, and you'll be in good shape.

I can't fault you for wanting to improve your scores, but the truth of the matter is, your mortgage scores are probably already good enough to get the best rate.