Credit Advice

Have a question? Have advice to share? The combined knowledge and experience of everyone in the Credit Karma community can help you. Enter your question or help others below to get started!

Question

Posted in Credit Scores
Profile Image

Question By
Recentgrad998

1 Contribution
0 People Helped
Doe my strategy make sense?/will I be able to get a Loan?
I'm hoping you all can provide some insight.
I have just graduated college and have a full time job. I have no debt and have 1 year 9 months of credit history.
I have a capital one cc with $3500 limit and a Wells Fargo with a $1200 limit. According to this site my score is right at 750. Will I be able to get a loan through Wells Fargo (long time customer) or a credit union?
Secondly, if I get a 48 or 60 month term what happens if I pay it off in two years? I have no expenses besides gas and insurance for the next two years thanks to my generous parents. Here is where my strategy comes into play. I'm getting married in June of 2018 and would like to purchase a house either just before or just after that time. So my thought process is to get this loan and pay it for 24 months to help my credit increase even more so I'm in a good place for a mortgage. In two years the inquires will be off my report and my debt to income ratio will be nothing. Does this strategy make sense/ good idea?

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW
All Responses

Results 1-2 of 2Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next
Top Contributor
995 Contributions
548 People Helped
Most Helpful Response

Helpful to 1 out of 1 people

Looks like you have your near future planned out, not many young people do, congratulations on the upcoming marriage.

-

There might need a small timing adjustment, many people have posted here and other places that once they paid off their loan early or on time, auto or personal, their score took 30~50 pts drop. Tho auto loan might boost your credit profile, however you might not want to apply for mortgage intermediately after its been paid, might need to wait few months.

Top Contributor
24 Contributions
24 People Helped

A few other things to think about.

The interest always sucks, and I'm guessing you are looking at an auto loan.  I've always gotten a rate discount at the 30% down point, although that apparently varies from lender to lender.  Also make sure you shop the rates around, be it for this loan, or your mortgage; I've found that CUs tend to offer better rates and Wells seems to be amongst the least competitive, rate-wise.  

Other things to take into consideration:


  1. Closing out the loan will raise your credit age at that point.  If you have only the two accounts open when you seek your mortgage out, you'll be at 3 years, 9 months, whereas keeping the loan open will lower you to 3 years, 2 months.  Not a huge difference.  
  2. There's a debt to income ratio to determine affordability.  If you apply jointly, and are both employed, keeping the loan open will probably not be a huge issue.
  3. Rather than pay down the first loan, you should consider whether you want to put that extra payment cash down on the house.  This will also help with everything from breaking 20% (and avoiding PMI) to allowing you to afford "more" house.
  4. Plan for higher interest rates.  We are at historical lows now, and it seems unlikely (but not impossible) that they could go lower, and in two years, realistically, they should be higher, so you will want to factor that into your financing.  Maybe it will be 25 basis points.  Maybe 100 or more. But some sort of pro forma projections will help you plan accordingly.  (Caveat:  Had you asked me in 2010, or again in 2014, if rates would be as low in 2016 as they are now, I would have tried to talk you into a wager.  *shrug*)

Results 1-2 of 2Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW

Reply to this Question

Write your response:
Enter Your Comments

The Credit Advice pages of the Site may contain messages submitted by users over whom Credit Karma has no control. Credit Karma cannot guarantee the accuracy, integrity or quality of any such messages. Some users may post messages that are misleading, untrue or offensive. You must bear all risk associated with your use of the Credit Advice pages and should not rely on messages in making (or refraining from making) any specific financial or other decisions.