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Credit Cards and Credit
Old 08-13-2006, 10:03 AM   #1
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Credit Cards and Credit

I have a question regarding the immediate short-term effect on credit of getting a credit card.

For the last couple years I have run my expense account through my checking (bad thing)...but I have stayed credit card free for years (good thing).

As I move up the ladder my expenses have grown exponentially, so I give. I am looking at getting an AMEX Charge card platinum/gold. That is neither here nor there however.

The question about credit ramifications comes from the fact that we will be closing on a new home in November. So - does getting an amex 2 months before we close effect my credit, and therefore my rate, etc. on the home?

TIA
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Re: Credit Cards and Credit
Old 08-13-2006, 10:20 AM   #2
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Re: Credit Cards and Credit

Having 'too' many or 'too' few credit cards will both negatively affect your rating.

The scoring system seems to like having some credit card history. I think 1 or 2 is optimal.

However I don't believe 2 months history will give you any benifit, and I am not sure if the recent draw would negatively affect your score.

That said, I think your history of payments on other issues (auto or other loans) will outweigh anything you did with a credit card for 2 months.

I would recommend asking your banker or mortgage broker about the credit card issue. Sorry I couldn't be more
definative

Anyone else have advice?
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Re: Credit Cards and Credit
Old 08-13-2006, 11:04 AM   #3
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Re: Credit Cards and Credit

Quote:
but I have stayed credit card free for years (good thing).
I disagree with your contention that not having a CC is a good thing. The sane use of a credit card, to include never retaining a monthly balance, is a wonderful, efficient way to maintain your your day-to-day spending. In addition, you will establish a good credit history which is often a good idea.
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Re: Credit Cards and Credit
Old 08-13-2006, 11:21 AM   #4
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Re: Credit Cards and Credit

I should clarify, I have a gas card and a best buy card - I use these and pay them off each month (gas and office supplies portion of my expense account - usually $450/mo for both).

Sorry for the misleading info.* I requested low limits on both cards, and almost don't consider them true CC's.

The difference I suppose in my mind is getting a card to take on the remaining $3000/mo.
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Re: Credit Cards and Credit
Old 08-13-2006, 11:46 AM   #5
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Re: Credit Cards and Credit

If you are responsible, I see NOT having a credit card as a bad thing...my Citibank card gives me 5% cash back on all gas, grocerices, and pharmacy purchases, and I usually get the full rebate of $300 cash per year. No fees or other tricks and I never carry a balance. It's the Citi Dividend Platnium rewards card.
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Re: Credit Cards and Credit
Old 08-13-2006, 11:50 AM   #6
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Re: Credit Cards and Credit

Quote:
I have a gas card and a best buy card - I use these and pay them off each month
Not sure why you should even have this kind of a CC. I'd recommend a MC, Visa or Discover card to make all purchases and leave it at that. Most places take these cards though I have seen a few that do not take Discover card (my preference). In that case, I use my MC as a back up.
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Re: Credit Cards and Credit
Old 08-13-2006, 12:01 PM   #7
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Re: Credit Cards and Credit

I understand all the arguements for and against CC's - it is a personal choice I have made.

Moving forward I will be getting a credit card, long-term I agree it is good fro credit, etc.

None of this is really what I am hoping to get advice on - I am asking what effect getting another CC (or my first true CC) will have short-term on credit.* For example will the credit check itself drop me a bit, will the extra credit amount hurt my income to debt ratio, etc.
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Re: Credit Cards and Credit
Old 08-13-2006, 12:12 PM   #8
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Re: Credit Cards and Credit

Matuski, I think the real answer is it depends. I guess I wouldn't be all that eager to monkey with my credit right before getting a mortgage, but it might not be that big a deal. How close to the edge of qualifying for the mortgage? If you are only looking at 20% debt to income with the mortgage and your FICO is at 750+, I doubt that the mortgage lender will care about a credit card application. If you are barely able to qualify for the mortgage, I'd hold off on the credit card application until after you get the mortgage.
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Re: Credit Cards and Credit
Old 08-13-2006, 12:13 PM   #9
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Re: Credit Cards and Credit

I believe it depends on whether you're close to the edge. If you have a lot of CC debt and no savings, then get another card - and run that up. Then, I'm guessing this will affect you negatively.

That doesn't seem like the case.

The loan person looks at your debt to income ratio, I think. So, if you have a lot of credit, but no high balance, then that's a good thing. Like someone else said, I don't think the short term is going to have an effect.

As long as you don't go out and put a Corvette on plastic, a week before your loan is processed, you should be fine.

but... I'm no expert. Those are just the threats I remember hearing from the loan officer when we bought our house. Debt/Income ratio.

-CC
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Re: Credit Cards and Credit
Old 08-13-2006, 02:05 PM   #10
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Re: Credit Cards and Credit

Quote:
Matuski, I think the real answer is it depends.* I guess I wouldn't be all that eager to monkey with my credit right before getting a mortgage, but it might not be that big a deal. How close to the edge of qualifying for the mortgage?* If you are only looking at 20% debt to income with the mortgage and your FICO is at 750+, I doubt that the mortgage lender will care about a credit card application.* If you are barely able to qualify for the mortgage, I'd hold off on the credit card application until after you get the mortgage.
I agree with brewer... Also there are multiple credit sites that you could read for more info....you wont find many people here with an aversion to credit cards anyway...most people here dont spend
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Re: Credit Cards and Credit
Old 08-13-2006, 02:22 PM   #11
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Re: Credit Cards and Credit

Would your mortgage lender share the score with you? It looks like you should be quite good and would have enough room for another CC with a reasonable limit.
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Re: Credit Cards and Credit
Old 08-13-2006, 08:51 PM   #12
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Re: Credit Cards and Credit

It's a bit off topic but I'm such a greedy fellow that I couldn't pass up the ~$30+/month to be made by using a rebate card for a $3000/month expense account. That's a buck a day!
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Re: Credit Cards and Credit
Old 08-13-2006, 09:08 PM   #13
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Re: Credit Cards and Credit

Really the key thing to show is that your income/debt ratio is under control.* Sounds like yours is, so get the card (I gather it is your only one), but keep your charges very low and of course pay it in full monthly.
After your loan is approved you can go wild
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Re: Credit Cards and Credit
Old 08-13-2006, 09:26 PM   #14
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Re: Credit Cards and Credit

Regarding your specific choice of an Amex card, there was something I read the other day that said cards with no preset spending limits can hurt your credit report. I can't find the article now, but basically it said that for many people with CCs that don't have the limit (like Amex) the monthly report shows your limit as whatever you spent/owed last month. In effect it shows that you are maxed out on the card.
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Re: Credit Cards and Credit
Old 08-13-2006, 09:32 PM   #15
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Re: Credit Cards and Credit

Quote:
Originally Posted by Leonidas
Regarding your specific choice of an Amex card, there was something I read the other day that said cards with no preset spending limits can hurt your credit report.* I can't find the article now, but basically it said that for many people with CCs that don't have the limit (like Amex) the monthly report shows your limit as whatever you spent/owed last month.* In effect it shows that you are maxed out on the card.*
Here it is:
http://articles.moneycentral.msn.com...ditRating.aspx
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Re: Credit Cards and Credit
Old 08-13-2006, 09:36 PM   #16
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Re: Credit Cards and Credit

From Nords link;;
<<Watts says credit card companies that offer no-preset-limit cards will, typically, allow credit-scoring companies to use the highest balance in place of the limit to calculate your credit utilization. So, if the cardholder has a $20,000 balance one month, that becomes the limit used for credit utilization>>

The key here is to keep your balance ultra low prior to the loan app.
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Re: Credit Cards and Credit
Old 08-13-2006, 10:37 PM   #17
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Re: Credit Cards and Credit

I'm a freebie junkie. If my good name will get me $100 (or more!) in cash without costing me a cent, i'm there. So let's see.... how many cards do I have.

1. AMEX Biz card ($150 bill credit... had the rear struts done)
2. Charles Schwab Visa- $150 visa gift card (some 'fun' vacation money)
3. SONY Visa card ($100 bill credit- got a memory foam topper from buy.com.)
4. Two Citi (forget which kind) cards- $100 each in gift cards (got a nice 2 line 5.8Ghz cordless phone, and some free dinner dates with the GF)
5. A Chase card.... forget which one, but I got $100, and it's a decent card too (5% gas + groceries)
6. Sears card (18mo 0% no payments for our washer/dryer)
6. Some others i'm forgetting...

Some of these cards are maxed out (0% BT sitting in an account), others don't have any balance. Usually once I "use up" a card (post-0% period), I merge the credit line with a really old credit card... this makes sure my avg account age is long enough, and my overall credit utilization is low. The only card I actually use is a Chase card that gives me 5% on gas and groceries The scary thing is that there are people out there with as much outstanding CC debt as I have, but they spent it all... except I have it all sitting in a bank account Checking my account balance is SWEET until I mentally subtract what I will eventually have to give back
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Re: Credit Cards and Credit
Old 08-14-2006, 09:39 AM   #18
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Re: Credit Cards and Credit

Disclaimer: The DW was a mortgage underwriter until 2 weeks ago, this is what I gathered from our conversations so I might have misunderstood.

The inquiry to you credit report will lower your FICO score a couple of points. As others have stated if your on the edge then it might be an issue. If not it should not be a problem.

With the short time you have the card prior to the closing of your mortgage AMEX might not report your usage. Many times it take several months before new credit actually hits your credit report, but then again they might begin reporting the first month. Her general rule of thumb is never open another credit line within 2-3 months of getting a mortgage. It raises too many questions and can cause problems.
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Re: Credit Cards and Credit
Old 08-14-2006, 09:51 AM   #19
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Re: Credit Cards and Credit

Thank you for the responses... Lets Retire - that is what I was looking for!
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Re: Credit Cards and Credit
Old 08-14-2006, 12:53 PM   #20
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Re: Credit Cards and Credit

...anyone car to comment on how a home foreclosure can negatively affect credit rating. Does it implode? If so, for how long?
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