Applying for Credit Card?? STOP And Read This

23 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'll second what @Hadar Orkibi said about not applying for anything that would affect your credit if planning to take a bank loan or similar.

I went on a rewards credit card rampage last year and signed up and was approved for 3 of them and finally denied on my fourth attempt. I love rewards credit cards but that's a different post entirely. The purpose of this reply is that the result of all that credit activity plunged my 800 credit score down to a 500 almost overnight. I had been anticipating a hit but did not expect anything that drastic. 

Luckily, I chose the time I did to sign up for all those cards knowing I wasn't going to be doing any bank borrowing for awhile and within a couple months my credit score was back up to the mid-to-high 700's. 

If you need to borrow money always be aware of what else you are doing that could negatively affect that.

@Hadar Orkibi , one trick to boost your credit score (sometimes significantly) assuming you pay your cards off every month any way as you claim, is to pay them off right before they report to the credit agencies. I was just paying my statement balances to avoid interest charges, but when we started shopping for a new primary residence I heard about this strategy and began paying the current balance instead right before they reported and it made a noticeable difference since I my credit report now had near $0 on all my revolving credit.

Also, your score isn't only affected by keeping below a 30% utilization rate overall for all your credit cards. It's also affected by each individual credit card's utilization rate. It's best to keep everything below 30% for the best score.

Originally posted by @Tim Puffer :

Also, your score isn't only affected by keeping below a 30% utilization rate overall for all your credit cards. It's also affected by each individual credit card's utilization rate. It's best to keep everything below 30% for the best score.

 No doubt that added to my credit score plunge as well. Since mine were rewards credit cards I hit them all very hard to quickly reach the "minimum spend" requirements for the added rewards perks. I was never late with any payments and paid them all back down quickly but maxing each card out within days of receiving it probably didn't help matters any.

Originally posted by @Ryan Murdock :
Originally posted by @Tim Puffer:

Also, your score isn't only affected by keeping below a 30% utilization rate overall for all your credit cards. It's also affected by each individual credit card's utilization rate. It's best to keep everything below 30% for the best score.

 No doubt that added to my credit score plunge as well. Since mine were rewards credit cards I hit them all very hard to quickly reach the "minimum spend" requirements for the added rewards perks. I was never late with any payments and paid them all back down quickly but maxing each card out within days of receiving it probably didn't help matters any.

 I hear ya! I love the good rewards cards too. I've actually settled on one that I really like finally. It is tempting to get more though and use those free points. A lot of them transfer to the same airlines and hotels.

I suggest that if you plan to apply for credit cards to help support business expenses, etc. then apply for as many as you can in (I believe) a 14 day period. Similar type inquiries count as one credit pull (usually) within that period. Secondly, you'll likely get approved for more credit because the companies aren't quick enough to check others. Even Bank of America is slow. I got three cards from them at one point at the same time. Its scary having this many credit cards but you also have more available credit. Like said above, its hard to get credit when you need it.

Just a note to consider.  I get business cards rather than personal and all of my business cards do not report to consumer credit therefore won't impact your credit score except for the inquiry.  

@Charlie DiLisio , those are the exception rather than the rule. Most "business" CC require a personal guarantee and still report to the Big 3, as the OP found out.

I would check on his AMEX.  I have 3 of them and none report to personal as well as 2 Chase Ink cards which do not report either.  Definitely need to do due diligence first.  Yes on the personal guarantee but that is only to qualify for the card so the inquiry shows up.  I think the bigger problem was the utilization and they saw that as someone in trouble.  Everything matters in this day and age.  Wishing everyone the best.  

Thanks Everyone for the responds. 

My cards are set up as automatic payment every month. and paid in full each month.

For now, i will just cover the charges so its near 0 balance at all times. 

The new CC are for business use, and on my LLC account - but yes i did gave personal guaranties.

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This is a no brainer.  I am surprised that you didn't know this as an experienced investor.  I tell ALL of my clients when they are looking for homes, not to do ANYTHING else until it is time to close.  Don't buy a car, don't apply for ANYTHING, don't even as for a credit increase on a credit card you already have!

Any and ALL of these actions can affect your credit score...EVEN a credit PULL can affect it (inquiry).

The fact is, ANYTHING that assumes you are taking on more credit equates risk for the lender.  Even though you don't intend on using the credit right now, it still counts as risk.

Good lesson to learn...sooner than later.

Originally posted by @Edward B. :

@Hadar Orkibi , one trick to boost your credit score (sometimes significantly) assuming you pay your cards off every month any way as you claim, is to pay them off right before they report to the credit agencies. I was just paying my statement balances to avoid interest charges, but when we started shopping for a new primary residence I heard about this strategy and began paying the current balance instead right before they reported and it made a noticeable difference since I my credit report now had near $0 on all my revolving credit.

 Ok not that it matters to me personally as I don't borrow money.. but how do you know when they report ???

The credit card companies report the balance in your monthly statement. I’m obsessive and check my score weekly so I’ve learned a lot of the tricks.

First, as others have said, definitely pay down your credit cards just before the credit card’s closing date for the month. If your statement cuts off on the 15th, pay on the 12th. I forgot to do this one month and my credit score dropped 40 points overnight.

Second, don’t pay all credit cards down to zero. Your credit score is actually better if you have a small balance on 1 or 2 of your credit cards to show you’re managing your finances responsibly.

@Jay Hinrichs , I typically do what @Michael M. does and pay them in full right before the due date. You can look on your credit report (or credit karma, etc.), though, and it will tell you the last time the account was reported. They usually report on the same day every month. 

The person I got the tip from said to call the company and ask them. I am skeptical that would be productive. It is also unnecessary. I usually see 10-40 point swings when I go from paying the balance in full to just paying the statement balance and vice versa. Your mileage may vary.

Just as a rule of thumb, inquiries have the biggest impact the first 90 days they are on your credit report. they hurt significantly less after 90 days. They fall off completely after 2 years.

@Steven J.

Inquiries from the same bank on the same day count as one pull. Different pulls are when theyre from different banks, or even the same bank but on different days. For example, if you apply to a BofA credit card today and tomorrow, those are both separate pulls, or if you apply to BofA and a Chase credit card the same day those are different pulls. I wouldn't advise someone in Real Estate to milk applications because even if the pulls combine, the underwriters will still see the number of new accounts, and the AAOA (average age of accounts) will decrease significantly with the number of new accounts being established.

Another strategy my husband and I employ is putting all income producing debt (mortgage) in his name and all other debt in mine.  Right now his credit looks great, but we are doing a $20k rehab which went on my no interest for 18 month credit card and my line of credit until we refinance in May.  My credit which is usually in the mid to upper 700s in the upper 600s right now due to the new card and mainly the debt utilization rate I presume. 

This is good information. I am using a credit repair company right now and my credit score went up from 580 to 620, which I was very happy about, but then I had to buy new tires and opened a new credit card with the available balance of 900 and had to use all of it. So now the credit score is around 594? 

Originally posted by @Michelle McKenzy:

This is good information. I am using a credit repair company right now and my credit score went up from 580 to 620, which I was very happy about, but then I had to buy new tires and opened a new credit card with the available balance of 900 and had to use all of it. So now the credit score is around 594?  

I am not sure how to edit, but here is the company I am using,

https://bestcreditrepairchicago.com/ . Did anyone hear of them, or recommend any other ones?

Hello,


So in about 4 months my credit score went up by 40 points so far. Is that good?

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