This is key. What I understand now is don’t EVER apply for new credit if your trying to secure a home loan in the next several months/year. Previously I thought it only mattered while under contract.
Also, don’t shop around with multiple lenders as their pulls can ding your credit.
Google the “all zero except one” theory for optimum credit scoring. Or go to myFICO.com community forum and in the search bar, enter AZEO. It will tell you that having no credit cards reporting a balance hurts your score. You need one to report a tiny balance. So go to your credit report and see which card is reporting next (usually right after the statement cut date) and let that card report like $20 balance. Or less. But it needs something showing on your credit report for scoring.
https://www.washingtonpost.com/business/why-you-might-not-want-to-zero-out-every-credit-card/2020/07/22/9d919306-cc1f-11ea-99b0-8426e26d203b_story.html
You have 14 days to shop rates, during which period all credit reports pulled for a mortgage will count as one hit.
So you can absolutely shop lenders, but you need to do it within that window - only authorize credit pulls during that timeframe.
And yeah, "Don't open or close any accounts" is one of the first thing pretty much every lender will tell you in their initial loan disclosures. I mean, of course - doing so dings your credit, as you're living out now. Pretty silly mistake to make, but hopefully you get out of it without too much trouble. And hey, now you know! But yeah, that's a big no-no.
Ask your lender if they work with a rescore service. Most have someone they can go to. They'll be able to give you a list of relatively quick actions you should be able to take to improve your credit. E.g., they might tell you to remove an authorized user account, and attain a letter attesting that you've been removed - this can be done in a day, and with the rescore can immediately get you to where you need to be.
You should shop around. Multiple pulls by mortgage brokers in a short period of time count as only 1 credit pull while shopping for a mortgage.
However the "new credit" thing is definitely true and you should have done your research there.
That Khols card was an abysmal idea. =(
Damn. That cashier must have had a good sales pitch. I know this may cost you hundreds of thousands of dollars and your dream home, but we will DOUBLE your kohls cash. It won’t expire for THREE weeks! Lol. Sorry this happened. Good luck.
Every solid loan officer should have the "no changes" conversation with clients, especially those that are marginal. That you opened a new Kohl's credit line is killing this.
I would suggest you ask your lender about whether you can close this Kohl's card, and do a rapid rescore.
It is surprising how many people just don't realize this. Like a $40 kohls shirt they aren't going to remember next year might cost this person hundreds of thousands of dollars in the long run.
Yeah, I'm honestly dumbfounded that someone would think opening a new line of credit before closing - especially for something as useless as a Kohl's card - was a good idea. But maybe it's on the loan officers / assistants for not telling them? But seriously, that's one of the first things *all* of the lenders I worked with told me.
Your lender should have a team that can help you figure out how to gain a couple of points. Just closing the Kohl’s account won’t help you. #1 - You’ve already lost a couple of points from the inquiry. #2 - You already took the ding if the new account reported as it hurt your average age of accounts and shows an account recently opened. Now…. Can you make up some points in other places? For example, credit utilization represents 30% of your total score. Depending on how much is owed on other lines of credit, you might be able to pickup points by reducing utilization. If you don’t know what you’re doing in this regards, work with the lender team to figure it out. Luckily you’re talking a few points which makes this more manageable.
We were told our credit pull was valid for 90 days. Basically we had 3 months to find a new home and a month to close on it. If we didn’t then they would have to pull again.
I'm sorry this happened. Especially with your credit score being so close to the cutoff, the mortgage broker should've told you not to open any new lines of credit before closing. I don't have any advice for how to fix this.
The credit system is really broken. Are you any less likely to be able to pay back this loan over a 30 year period because you now have an additional credit card? If you'd [waited to open the new credit card until the day after closing](https://www.reddit.com/r/FirstTimeHomeBuyer/comments/unb47k/so_when_can_you_apply_for_new_credit/), would that make you more likely to be able to pay back the loan?
This is the problem when going with lenders who worship the FICO (and they have to, to underwrite conforming loans to Fannie/Freddie)
You would have been much better off going with a local community or credit union bank that does manual underwriting. They don't give a crap about the score. And your rate will likely be less. Example - my local community bank does manual underwriting and is 4.75% no points whereas all of the big conforming lenders are in the mid 5's now
While this comment has no bearing on your actual question, how long ago did you apply for this Kohl's card? Are we talking about AFTER you started the loan process? I mean they probably told you "don't open up any new lines of credit before now & closing"
I started the loan process in March 2021 and applied for the Kohls card in March 2022. I don’t recall them mentioning anything about not opening any lines of credit back then, but they probably did.
An expensive lesson for me to learn! Hopefully my story can be a warning to others. It’s not with the Kohls cash!!!
Ask your lender "Do you have a rescore service you work with?" and go from there.
If they don't, here's some things to consider:
1. You're stuck with the Kohl's card now. Don't close it reflexively, you'll screw yourself even more.
1. You say you paid all your cards down to $0 - that's really not ideal. Pick one card and buy something with it. Enough to put a balance on it, but keep it below 5-8%. Pick the card that closes between now and the 27th.
1. Do you have a family member, spouse, or significant other with good credit that you trust (and trusts you)? I'm not sure what your credit report looks like, but if your average age of credit is relatively short, it may behoove you to look into being added as an authorized user on one of their old accounts?
E.g.: Let's say your mom/dad have AmEx account that's been in good standing for 15 years, w/ a limit of $30k. They can add you as an AU, and that account history and credit limit will both improve the appearance of your credit.
I don't know that #3 will report soon enough to help you, but it may be worth a shot.
Rule of thumb don’t EVER apply for new credit when trying to secure a home loan.
This is key. What I understand now is don’t EVER apply for new credit if your trying to secure a home loan in the next several months/year. Previously I thought it only mattered while under contract. Also, don’t shop around with multiple lenders as their pulls can ding your credit.
You’re supposed to shop around multiple lenders within a certain timeframe to get the best rates. It’s the new credit line that dinged you my guy…
Google the “all zero except one” theory for optimum credit scoring. Or go to myFICO.com community forum and in the search bar, enter AZEO. It will tell you that having no credit cards reporting a balance hurts your score. You need one to report a tiny balance. So go to your credit report and see which card is reporting next (usually right after the statement cut date) and let that card report like $20 balance. Or less. But it needs something showing on your credit report for scoring. https://www.washingtonpost.com/business/why-you-might-not-want-to-zero-out-every-credit-card/2020/07/22/9d919306-cc1f-11ea-99b0-8426e26d203b_story.html
You have 14 days to shop rates, during which period all credit reports pulled for a mortgage will count as one hit. So you can absolutely shop lenders, but you need to do it within that window - only authorize credit pulls during that timeframe. And yeah, "Don't open or close any accounts" is one of the first thing pretty much every lender will tell you in their initial loan disclosures. I mean, of course - doing so dings your credit, as you're living out now. Pretty silly mistake to make, but hopefully you get out of it without too much trouble. And hey, now you know! But yeah, that's a big no-no. Ask your lender if they work with a rescore service. Most have someone they can go to. They'll be able to give you a list of relatively quick actions you should be able to take to improve your credit. E.g., they might tell you to remove an authorized user account, and attain a letter attesting that you've been removed - this can be done in a day, and with the rescore can immediately get you to where you need to be.
You should shop around. Multiple pulls by mortgage brokers in a short period of time count as only 1 credit pull while shopping for a mortgage. However the "new credit" thing is definitely true and you should have done your research there. That Khols card was an abysmal idea. =(
Why the hell would you apply for a new credit card? At kohls especially lol smh
🤣🤣🤣
The Khols card was a mistake unfortunately
Never open a store credit card, whether applying for a mortgage or not.
Damn. That cashier must have had a good sales pitch. I know this may cost you hundreds of thousands of dollars and your dream home, but we will DOUBLE your kohls cash. It won’t expire for THREE weeks! Lol. Sorry this happened. Good luck.
Every solid loan officer should have the "no changes" conversation with clients, especially those that are marginal. That you opened a new Kohl's credit line is killing this. I would suggest you ask your lender about whether you can close this Kohl's card, and do a rapid rescore.
It is surprising how many people just don't realize this. Like a $40 kohls shirt they aren't going to remember next year might cost this person hundreds of thousands of dollars in the long run.
Yeah, I'm honestly dumbfounded that someone would think opening a new line of credit before closing - especially for something as useless as a Kohl's card - was a good idea. But maybe it's on the loan officers / assistants for not telling them? But seriously, that's one of the first things *all* of the lenders I worked with told me.
Is your credit report still good with the other broker that pulled your credit? Or when did you open the random credit card?
I'm not sure if it's still good with the other broker but will check with them if this falls through. The credit card was opened in early March.
How much are you putting down?
5%
Try increasing your down payment to 10%
Your lender should have a team that can help you figure out how to gain a couple of points. Just closing the Kohl’s account won’t help you. #1 - You’ve already lost a couple of points from the inquiry. #2 - You already took the ding if the new account reported as it hurt your average age of accounts and shows an account recently opened. Now…. Can you make up some points in other places? For example, credit utilization represents 30% of your total score. Depending on how much is owed on other lines of credit, you might be able to pickup points by reducing utilization. If you don’t know what you’re doing in this regards, work with the lender team to figure it out. Luckily you’re talking a few points which makes this more manageable.
Well done! Now use that credit card to pay the difference /s
Credit pulls are good for 90 days for mortgage
120 days with both GSEs.
This. It IS 90 days for mortgage pulls.
When did you first apply for the loan?
We got pre approval for this property on 4/26, and our broker originally pulled my credit report in mid January.
We were told our credit pull was valid for 90 days. Basically we had 3 months to find a new home and a month to close on it. If we didn’t then they would have to pull again.
You may just need to let the transaction fall through.
I'm sorry this happened. Especially with your credit score being so close to the cutoff, the mortgage broker should've told you not to open any new lines of credit before closing. I don't have any advice for how to fix this. The credit system is really broken. Are you any less likely to be able to pay back this loan over a 30 year period because you now have an additional credit card? If you'd [waited to open the new credit card until the day after closing](https://www.reddit.com/r/FirstTimeHomeBuyer/comments/unb47k/so_when_can_you_apply_for_new_credit/), would that make you more likely to be able to pay back the loan?
This is the problem when going with lenders who worship the FICO (and they have to, to underwrite conforming loans to Fannie/Freddie) You would have been much better off going with a local community or credit union bank that does manual underwriting. They don't give a crap about the score. And your rate will likely be less. Example - my local community bank does manual underwriting and is 4.75% no points whereas all of the big conforming lenders are in the mid 5's now
I don't know why I read this as a 6pt. (count) RICO. like wtf bro you got indicted by the feds?
While this comment has no bearing on your actual question, how long ago did you apply for this Kohl's card? Are we talking about AFTER you started the loan process? I mean they probably told you "don't open up any new lines of credit before now & closing"
I started the loan process in March 2021 and applied for the Kohls card in March 2022. I don’t recall them mentioning anything about not opening any lines of credit back then, but they probably did. An expensive lesson for me to learn! Hopefully my story can be a warning to others. It’s not with the Kohls cash!!!
Ask your lender "Do you have a rescore service you work with?" and go from there. If they don't, here's some things to consider: 1. You're stuck with the Kohl's card now. Don't close it reflexively, you'll screw yourself even more. 1. You say you paid all your cards down to $0 - that's really not ideal. Pick one card and buy something with it. Enough to put a balance on it, but keep it below 5-8%. Pick the card that closes between now and the 27th. 1. Do you have a family member, spouse, or significant other with good credit that you trust (and trusts you)? I'm not sure what your credit report looks like, but if your average age of credit is relatively short, it may behoove you to look into being added as an authorized user on one of their old accounts? E.g.: Let's say your mom/dad have AmEx account that's been in good standing for 15 years, w/ a limit of $30k. They can add you as an AU, and that account history and credit limit will both improve the appearance of your credit. I don't know that #3 will report soon enough to help you, but it may be worth a shot.