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vardievard
(@vardievard)
Joined: 7 years ago
Posts: 49
April 17, 2013 8:32 pm  

Situation: someone I know wants to apply for a mortgage in about 12-18 months. She has had a credit card in her name since high school, is an added user on most of her parents cards, and last year I had her get two more cards that helped with trips we went on, none of which have been closed or intend to be. No student loans or other debt.

I'm trying to decide whether or not to convince her to get 2 more cards that would help us in future trips I'm planning and which also would just be kept open.

I believe her current score is around 740-750. Do you think two more cards is a bad idea and would hurt on long run (mortgage wise)

Varding since 1986...


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miles and smiles
(@miles-and-smiles)
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Posts: 17570
April 17, 2013 8:42 pm  

vardievard, post: 1927607, member: 86215 wrote: Situation: someone I know wants to apply for a mortgage in about 12-18 months. She has had a credit card in her name since high school, is an added user on most of her parents cards, and last year I had her get two more cards that helped with trips we went on, none of which have been closed or intend to be. No student loans or other debt.

I'm trying to decide whether or not to convince her to get 2 more cards that would help us in future trips I'm planning and which also would just be kept open.

I believe her current score is around 740-750. Do you think two more cards is a bad idea and would hurt on long run (mortgage wise)

You will likely find answers to many of your questions in this thread from post #34 on:
http://milepoint.com/forums/threads/credit-score-in-free-fall.56157/page-2

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Mike Reed
(@mike-reed)
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Posts: 2467
April 17, 2013 9:43 pm  

New cards will reduce her "average age" which could impact her score, but more important is the signal it sends to potential lenders - she's seeking additional credit AND a mortgage. Bad juju.

What she REALLY needs is a lender that isn't score-based, but will do an actual full underwriting of the loan and uses credit score as one component. 740/750 (if that's her FICO) is a great score and she'll have no problem getting a mortgage.

Remember that your mortgage (or rent) shouldn't exceed 25% of your take-home pay to be "affordable." And 15-year fixed with 20% down is the way to go - avoids PMI and pays off with less interest.

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paladin87
(@paladin87)
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April 17, 2013 10:05 pm  

Personally, in the 12-18 month frame, I would not sweat it at all based on already solid credit, as long as she does not do anything stupid like pay late, etc. If/when I was looking for a mortgage, I would be concerned in the 3-6 month out frame, but not 1.5 years.


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jeffrey930
(@jeffrey930)
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Posts: 58
April 17, 2013 11:51 pm  

I would not apply for any more credit card until I get the morthgage loan. I would rather make sure I get the best rate on a morthgage loan than apply for credit card that has a bonus of 40K or 50K worth about $500.


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TravelBear
(@travelbear)
Joined: 7 years ago
Posts: 1045
April 18, 2013 12:43 am  

I cannot see how 1 credit card 12 months ahead of a mortgage could be so detrimental. She has a good credit score, as long as she remains responsible with her credit she should be fine. She will see a drop initially but in 3-4 months her score should go back up and possibly be higher.

So many of the churners are talking about getting 5-6 at a time then doing it again as soon as they can. THAT kind of behavior is major bad juju, as Mike put it.

This is definitely a due diligence on her part, and something she needs to feel comfortable with. No one knows the answers for sure.

Something witty will eventually occupy this space. Give me time.

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Mike Reed
(@mike-reed)
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Posts: 2467
April 18, 2013 1:18 am  

TravelBear wrote: So many of the churners are talking about getting 5-6 at a time then doing it again as soon as they can. THAT kind of behavior is major bad juju, as Mike put it.

She's near 740. Dropping below 720 would be BAD.

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HaveMilesWillTravel
(@havemileswilltravel)
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April 18, 2013 1:22 am  

Personally, I'd be very reluctant to make any recommendations to a friend in a case like this. If I knew for sure it would have a negative affect I would warn and provide resources to review, but I wouldn't do the opposite.

I don't always drink beer, but when I do I will certainly NOT drink Bud Light.


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jbcarioca
(@jbcarioca)
Joined: 8 years ago
Posts: 17626
April 18, 2013 2:49 pm  

HaveMilesWillTravel, post: 1927794, member: 648 wrote: Personally, I'd be very reluctant to make any recommendations to a friend in a case like this. If I knew for sure it would have a negative affect I would warn and provide resources to review, but I wouldn't do the opposite.

Agree,
Mortgage lenders use different credit scoring criteria than do credit card lenders, so the scores are NOT equivalent. A credit score of >750 for a renter, (i.e. someone who does not own their primary residence) is pretty decent anyway. Preparing a year ahead the most important issue is not to change jobs, closely followed by not changing marital status, nor residence. In any event so long as you're planning on at least a 20% down payment you'll probably get a very good rate. The lower the down payment, longer the term, the higher the rate and the greater chance of rejection.

Beyond those factors Loan to Value (LTV) is a very large factor, and is based on the lenders appraisal. Thus, for a first residence purchase buying a smaller house or unit in an area dominated by larger and more expensive ones usually is a leading indicator of a good LTV.

Mortgages approvals are always based on the combination of borrower and collateral, not just one of them.


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Traveling Momma
(@traveling-momma)
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April 18, 2013 6:33 pm  

Funny enough my FICO score just increase from 740 to 756 after only two months after my first App-O-Rama of 4 cards on top of the 4 cards long-term cards I already had.

However, I would not recommend doing a churn now before the poster applies for her mortgage. In this credit environment you need to demonstrate you are not a risk and that you do not need credit from credit cards to get by. The underwriter will assume you're using those lines of credit not just meeting the minimum spend and then waiting to churn again.

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flightnurse
(@flightnurse)
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April 21, 2013 4:36 am  

Mike Reed, post: 1927790, member: 5268 wrote: She's near 740. Dropping below 720 would be BAD.

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How so? I just refi my mortgage, my mid score was 720, and I locked in a very excellent rate of 3.45, I also got three new CC 6 months ago, I have $200 balances on them which was explained to me was better then not having a balance on them according to the underwriter who did my refi.

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flightnurse
(@flightnurse)
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April 21, 2013 4:40 am  

vardievard, post: 1927607, member: 86215 wrote: Situation: someone I know wants to apply for a mortgage in about 12-18 months. She has had a credit card in her name since high school, is an added user on most of her parents cards, and last year I had her get two more cards that helped with trips we went on, none of which have been closed or intend to be. No student loans or other debt.

I'm trying to decide whether or not to convince her to get 2 more cards that would help us in future trips I'm planning and which also would just be kept open.

I believe her current score is around 740-750. Do you think two more cards is a bad idea and would hurt on long run (mortgage wise)

I just went through a refi, I also got new CC's 6 months ago, my mid-score was 720 and was able to lock in a excellent rate of 3.45. IF your friend is a 12-18 months out, she shouln't have a problem. Of course, she should have a plan on when she plans on doing the purchase. So for my experience, the new CC did not hurt me getting an excellent rate. OF course YMMV..... I'm just giving a recent data point.

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Mike Reed
(@mike-reed)
Joined: 8 years ago
Posts: 2467
April 21, 2013 11:48 am  

flightnurse wrote:

How so? I just refi my mortgage, my mid score was 720, and I locked in a very excellent rate of 3.45, I also got three new CC 6 months ago, I have $200 balances on them which was explained to me was better then not having a balance on them according to the underwriter who did my refi.

Your mid was 720. Why take the chance here that this isn't her mid or highest that would drop below 720? If she wants a house, what small cc reward could possibly be worth the risk?

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TravelBear
(@travelbear)
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Posts: 1045
April 21, 2013 12:24 pm  

Mike Reed, post: 1931164, member: 5268 wrote: Your mid was 720. Why take the chance here that this isn't her mid or highest that would drop below 720? If she wants a house, what small cc reward could possibly be worth the risk?

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Mike Reed, wasn't sure if you actually poo-poo'd my suggestion of 1 card 12 months prior. I certainly agree that an AOR of more than 3 cards should be considered risky. But I got the feeling you still felt like 1 would be too much. Did I read that wrong?

Flightnurse, I wonder if there is a difference since you were refinancing v. first time loan?

We actually just started the refi process and locked in at the same rate as flightnurse. I did get 3 cc last year and my mid score was 784.

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Mike Reed
(@mike-reed)
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Posts: 2467
April 21, 2013 4:46 pm  

It's about priorities. Is the priority another credit card or a house?

Without a full financial picture (debt to income, available credit, etc.) it's hard to make an assessment.

Overall, though, I wouldn't recommend making any changes other than paying down existing debt and/or saving for a down payment at this point.

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