6 Replies Latest reply on Oct 18, 2016 10:03 AM by Angela G

    Credit ratio

    Angela G

      Hello. After nine years of riding in the same vehicle, I'm interesting in purchasing a new vehicle. Last time I checked, my credit score was around 720. Here's the question. We plan to purchase a new home in another state summer of 2017. How much will this car purchase affect our credit score as we work to secure a new home loan (will sell our current home).

        • Re: Credit ratio
          MyR Community Manager

          Angela G,

           

          Thank you for reaching out to ask your question. Congratulations on the soon-to-be new purchase of a vehicle. That's very exciting. I would like to encourage you to reach out to your financial advisor as they would be the best resource to help you understand the effects of these new purchases on your credit score.

          Additionally, I will pose the question to our sister community of experts and see what advice they have for you as you get ready to make these purchases. Stay tuned as one of the W2W Experts will also have some tips and suggestions for you.

          The MyRetirement community is full of members that have first-hand knowledge in areas like this and can too, be of help. I think JerryD is a great wealth of knowledge on a wide array of topics. Hoping he can help to share some tips.

          • Re: Credit ratio
            JerryD

            Whereas I am not at all expert in how credit score are exactly set, I frequently try to educate myself on such issues using reliable Internet resources. Here is one from INVESTOPEDIA that explains the factors that determine your score:

             

            The 5 Biggest Factors That Affect Your Credit | Investopedia

             

            If I were in your situation, I would educate myself as best that I can and then go into my banker for a sit-down. Give him your plan and current score along with the amounts and timing of your purchases. He probably can give you a good idea of the impact of a new car followed by a new house.

              • Re: Credit ratio
                Angela G

                Thanks JerryD. I will review these and pay close attention to 2. Amounts Owed !

                  • Re: Credit ratio
                    MyR Community Manager

                    Angela G,

                     

                    Please see what W2W Expert Manisha Thakor says about your credit ratio question.

                     

                     

                    From Manisha:

                    "The short answer is that there is no one definitive answer to this question but if you shop for your car in a concentrated period of time and make your car payments on time it shouldn’t affect it much, if at all.

                     

                    The longer answer is that you have more than one credit score. There are three major credit bureaus that collect data on consumers:  Experian, Equifax and TransUnion.  Then various credit scoring “organizations” use that data in their own proprietary formulas to determine their version of your credit score. The most commonly known credit score is your “FICO” score, a propriety score based on the methodology of the Fair Isaac company. However, individual banks (specifically the ones making loans to you for that new home) may - but don’t always - use their own calculation methodology to translate the data in your credit file into their version of your credit score.  In general, the most important factors to a high credit score are paying your bills on time, the length of your credit history (longer is better, that’s why you may hear people say never close your oldest credit card) and your “debt utilization ratio” which is the amount of debt you have outstanding relative to your credit limits on your credit cards. As for where car loans factor in — multiple inquiries by car finance companies over a short period of time generally - but not always - are considered to be essentially “one inquiry” so that should not hurt your score. And your score is (ironically for those who pay for everything with cash) helped by having several different types of debt — so having a car payment that you show you are making responsibly can even help. To get a more specific answer, it can be helpful to speak with a mortgage broker about the various credit scoring policies of the lenders they are finding most attractive to work with these days to give you more specifics on how the lender you might ultimately take your mortgage from views its credit scoring policy."

                • Re: Credit ratio
                  Angela G

                  Thanks much Manisha. I'll look into contacting a mortgage broker.