Author Topic: Credit Score - How good is good enough?  (Read 769 times)

Samuel

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Credit Score - How good is good enough?
« on: October 05, 2018, 10:52:09 AM »
I'm yet again reconsidering and running the numbers on purchasing something in my hot but slightly cooling hometown (that I'd rather not be priced out of) real estate market.

Then out of the blue a week ago I get an email from my credit card company saying that my credit score has dropped 50 points (apparently they include FICO monitoring as a benefit). Score went from 820ish to 770ish. As far as I can tell it's due to my only installment loan (a car loan paid off 6.5 years ago) dropping off the report and leaving only revolving accounts (credit cards) and a "lack of account diversity" that I got dinged for.

Pretty glad this didn't happen in the middle of closing on a property... but is it worth seeking a cheap installment loan of some kind to get back the account diversity that hurt me? Most sources I've seen say there isn't a mortgage rate advantage over 760, but does anyone have direct experience that says otherwise? Even if that's true should I be worried to be so close the to 760 threshold where a nudge down (due to inquiries, temporarily high utilization ratios, etc) could mess up a pre-approved mortgage rate or loan closing?

If a new installment loan would truly help, any ideas for the cheapest option?

Thanks.



Lmoot

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Re: Credit Score - How good is good enough?
« Reply #1 on: October 18, 2018, 04:30:40 AM »
I'm yet again reconsidering and running the numbers on purchasing something in my hot but slightly cooling hometown (that I'd rather not be priced out of) real estate market.

Then out of the blue a week ago I get an email from my credit card company saying that my credit score has dropped 50 points (apparently they include FICO monitoring as a benefit). Score went from 820ish to 770ish. As far as I can tell it's due to my only installment loan (a car loan paid off 6.5 years ago) dropping off the report and leaving only revolving accounts (credit cards) and a "lack of account diversity" that I got dinged for.

Pretty glad this didn't happen in the middle of closing on a property... but is it worth seeking a cheap installment loan of some kind to get back the account diversity that hurt me? Most sources I've seen say there isn't a mortgage rate advantage over 760, but does anyone have direct experience that says otherwise? Even if that's true should I be worried to be so close the to 760 threshold where a nudge down (due to inquiries, temporarily high utilization ratios, etc) could mess up a pre-approved mortgage rate or loan closing?

If a new installment loan would truly help, any ideas for the cheapest option?

Thanks.

Iíve also heard that 760-770 and above gets you prime rate and special financing (like 0% car loans). I have never heard of anything higher than that.

Such a high drop in score likely due more to average age of credit, than diversity. Diversity is a low impact portion of score calculation, and age is up to 1/3 of calculation.

Opening a new account would drop your age further, it would ding you for a credit check, and could mess you up even further. Also, you would have to calculate if paying the fees and interest of a new account would cover the difference between what you expect you to get with a higher score. Which I personally donít think would be anything...and I donít think your score would go higher.

August26th

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Re: Credit Score - How good is good enough?
« Reply #2 on: October 19, 2018, 12:45:23 PM »
For mortgage purposes with Fannie Mae/Freddie Mac (the government sponsored enterprises that own the grand majority of mortgages in our country), 740 and higher is the highest credit tier. If you are planning to put less than 20% down and will pay PMI, then 760 is typically the highest tier to get the best PMI rates.

I would not worry about it at all, as you are going to be fine from a credit score perspective.