3

credit score

Here's a rough breakdown of my non detailed credit report.

I want to buy a house well condo in a year. I am in the 28% tax bracket. I have 20% or more down to avoid PMI.

My question is this credit too low to pull it off? The reason my utilization is so high is because I put all my expenses on the card and pay them off each month.

The only thing I can change is the available limit. Capitol one denied increasing my 4.5K card but they didn't run a real report. Should I try and open another credit card to increase my credit score (only have 2 and a 2 years paid off out of 3 year car loan).

My total credit won't increase so I was wondering if it makes sense to open another credit card. I will have another inquiry which is a minus but will have maybe 3-5k more credit. Should I do that or stick and hold at my current situation?

Mind you I know before getting the mortgage to pay for everything in cash so I am utilizing 0% of my available credit. I could pay off my car loan early but I enjoy the extra leverage for investing.

Vicky
  • 23,982
  • 4
  • 60
  • 86
Frank Visaggio
  • 525
  • 5
  • 14
  • 1
    Total CL doesn't really matter, a new card will lower your AAoA; I say not worth it. Remember you want ~1-10% util not 0% for optimal score. – VBCPP Apr 07 '15 at 04:17
  • 1
    I had this same issue. 1 credit card with a 10k limit. I pay all my bills every month with it, then pay it off. The trick I found to getting around getting dinged on your credit is to pay EVERYTHING in one day. Then, pay the card off as soon as it registers your charge. If you're capable of structuring it this way then it will clear what you owe prior to the statement getting cut. Like I said, if you're capable this will fix it. It's no easy task to structure your bills and income in this way though. – DotNetRussell Apr 07 '15 at 11:01
  • The caveat to this of course is if you can clear your card every month you benefit from the reward points, interest free. This is why I do it. It helps build your credit as well though. – DotNetRussell Apr 07 '15 at 11:03
  • @AnthonyRussell I can do it I am just wondering how. So every time I make a purchase pay it off one the charge hits? – Frank Visaggio Apr 07 '15 at 12:27
  • Or if my payment is due on say the 10th are you saying rather than just pay the balance that's do also pay anything that will show up on next months bill – Frank Visaggio Apr 07 '15 at 12:28
  • It depends on how you are using your credit. I rarely use mine for purchases. I use it only to pay bills. I pay all the bills on the first. This is difficult because my water for example isnt due till the 10th. So I have to call the water company and get them to figure out my bill. I charge everything on the first of the month. Then, a few days later it registers I charged it and I use the cash from my income that would pay the bills anyway to pay down the credit card. The whole process takes around 3-4 business days but your credit card statement should report a zero balance – DotNetRussell Apr 07 '15 at 12:31
  • You can rack up rewards points really quickly this way also. Last year I think I pulled in close to 20k reward points with zero dollars interest paid. I cashed them in for a $200 cash back which I used to buy xmas gifts lol #CheapnessAtItsBest – DotNetRussell Apr 07 '15 at 12:34
  • Getting another card will reduce your average life of CC. See what happens when you get your utilization to around 7-10% first. That will raise your score and may be enough to put you in the next bracket for better mortgage rate. – Sun Apr 07 '15 at 16:11
  • Bob - I'm in agreement with Anthony about 80%. There's no need to make more than one extra payment per month. Not unless your utilization is really running high. Most cards report the number on the bill to the reporting agencies. Just make that extra payment before the bill is cut. My cash back has averaged $2000/yr for the last decade and then some. Most of it goes right in a 529 college account, now over $25000 from only the cash back funding. – JTP - Apologise to Monica Apr 08 '15 at 00:02
  • Thanks @JoeTaxpayer and everyone else. Very helpful advice from all! – Frank Visaggio Apr 08 '15 at 00:52

1 Answers1

3

The question Should I keep recently opened Credit Cards that I don't use? will provide some useful details for you, including an elaboration of the comment from VBCPP regarding zero usage.

686 isn't bad. I am a real estate agent, and find that banks are typically looking for 640 or higher for their loans.

Your scorecard is a great way to understand what you can work on. Keep paying on time (of course), the new card - it depends on how many existing accounts you have. If your 2 year average is 24 months/2 accounts, and you add one right now, in one year, you'd be at 16 months/3 accounts. There's not much else you can do for that one except to allow time to pass. Of course, there's the improvement to showing more accounts open, but the hit from a recent credit inquiry. Utilization, discussed in the linked article, can be finely tuned by making small payments mid cycle, i.e to pay enough before the bill is cut to drop the utilization. This easily gets utilization to an "A" and you can try this sooner than later to see the effect.

Community
  • 1
JTP - Apologise to Monica
  • 172,273
  • 34
  • 296
  • 560
  • 1
    I wanted to say 686 wasn't going to stop him from buying but I wasn't entirely sure. I'm under the impression it's more your debt to income ratio that will stop you from getting a loan than it is your credit score. – DotNetRussell Apr 07 '15 at 11:06
  • 1
    In Bob's situation, his income will dictate his maximum loan amount. A really bad credit score can be a deal killer, a low score can push the rate higher. It's not all black and white. Other articles here discussed the rest of the mortgage qualification process. – JTP - Apologise to Monica Apr 07 '15 at 11:15
  • Sometimes mortgage qualification seems like rolling for territory in Risk. You can go into it with the best odds, or so you think. Yet, you get denied for the most ridiculous reasons. Like a bandaid over the sub-prime era. – DotNetRussell Apr 07 '15 at 11:20