Applying For Credit Card?? Read This First

4 Replies

Hi BP friends, On Friday I had a good lesson I want to share with you when it comes to FICO score. I’m about to close on a deal in the next 30-60 days and lock rates on Monday prior to the Fed increase on Tuesday. I just find out that my Credit Score went down from 811 at the end of Feb to 719 on Friday 16 March! This is for no real reason apart from: 1. I applied for 2 business credit cards, one with my local bank and one with Amex. To have business expenses separate from personal account. 2. In the past few weeks I charge more then the usual maximum 30% of the Credit card limit. All though I Allways pay my credit card on time and often in advance this higher Ballance was spotted by the credit company at the wrong time. This mistake is going to cost me higher interest cost of over .5 base points. But I’m keeping positive, it sounds like it is likely that I can lock in the rate and receive some sort of adjustment if / when my credit FICO score improves prior to drawdown date. I have 60 days... to go back to at list 750 FICO The moral of the story- DON’T APPLY FOR MORE CREDIT while you processing a loan or planing to in the short term!

I’d bet it was more you going over 30% of your available credit than the fact you opened 2 new accounts. No way opening 2 new accounts dropped your credit score that much. Nevertheless, good idea to keep an eye on your credit and not make any drastic changes until your loan is actually closed since lenders will often pull your credit when you first apply and again right before you close. 

I believe the rule now is not to use over 10% of your credit, and two new credit cards can have a significant effect on your credit. That is 2 applications (on top of the mortgage application making it 3) and since they are new they are reducing your average credit line history by a decent amount depending on the total number of credit cards you already have.

Try paying off your card before the due date (assuming you pay it off completely) and how much you used won't show up.

Your mortgage broker will tell you not to do ANYthing with your credit while you're in the approval period.  The only thing that they really are ok with is paying down balances, but not too much because if you use up too much cash, they'll start to fret that you don't have enough for down payment.

I know of a person who lost their mortgage because their spouse went to Target and charged up $500 worth of something on the Target store card.  Apparently that was enough to freak out the underwriter and they denied the mortgage.

I've opened about 12 credit cards, both personal and business, in the last 12 months are so.  My credit has remained at about ~745.  I keep the balances low [e.g., generally pay them off every month].  The biggest effect on my credit has been the one missed payment due to a change in address.  Bah!

Frankie Woods

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