Dear Readers, I have a confession to make.

I recently got my personal record low credit score of 717 (based on experian credit bureau, my transunion credit score is still 740, but down from 800; haven’t checked my equafax credit score.)

My score lowered for the following reasons,

  1. I took on my partner’s credit card debts willingly to optimize his credit score so he can refi his car loan to a lower rate.
  2. I am helping my father with his expenses (just received a 6k tax bill… and medical expenses).
  3. I am aggressively funneling my limited cash towards retirement savings, while charging daily expenses on my credit cards.
  4. I am taking full advantage of new card offers that give me fantastic cash back deals. (eg. 10% cash back @ nordstrom rack when i bought my dad shoes in addition to the $100 dollar cash back with the first $1000 spent in first 90 days of opening the account.)

Consequently, my credit score took hits for

  1. increasing debt/total credit limit ratio.
  2. number of recent hard credit inquiries from credit card applications.
  3. number of cards with revolving balances.

However, the good news is

  1. I can pay down my credit card debt by 10k pretty quickly and bring my score back up to the 740+ range.
  2. credit inquires fall off of credit report in 2 years, as my old inquiries in 2013 fall off, total # of inquires on my report will decrease and my score will increase.
  3. I can just make minimum payment +1 dollar to my current credit cards with balances (all @ 0% interest), and time will buy my credit score back. With just 6 months of TIMELY payment to all my accounts including mortgage (i’ve never had a late payment per my credit history), my score would be back up to 747.
  4. I’m still happy that my most expensive debt is currently my mortgage @ 3.375% rather than student loan @ 7%.
  5. I’m still convinced that I’d rather max out 23.5k of retirement savings this year and throughout pre-attending years than to pay down my 0% credit card debt.
  6. this a bit of rationalization,  a lower credit score will slow me down somewhat… or i would be buying a 2nd house NOW… (that’s another post to discuss my plan to purchase a 2nd house.) waiting to buy a 2nd home in 6 months-2 years would be a wiser thing to do than to take on extra liability NOW.

 

So the most important point is neither how comfortable I am with a lower credit score nor how I will boost it back up again.

 

The most important point is learning how to TIME your credit troughs. 

 You want your credit peaks to be right before you make large item purchases such as a house, a car, or a yacht (which I will never buy) so that you can qualify for the best rates and terms, saving you money for the long term and in great magnitude.

Car loan and mortgage companies treat 740+ consumers with the best rates and terms. So if you are saving money on higher interest debts by utilizing credit cards and/or enjoying cash back from charging your cards, be sure you slow down and trend your credit score back up either with TIME and/or MONEY to prepare for the ultimate credit check that will determine the rates and terms of your new debt (ie. mortgage, car loan, medical practice loan, etc.)

This takes a little planning, but it is entirely doable. Talk to a loan officer 6 months-1 year before you want to buy a house/a medical practice/medical equipment/car and use your time/cash during that next 6-12 mos to boost your credit score to its highest.

Next post, I will discuss what I have learned from buying my first home, refinancing it and then attempting to purchase a 2nd house. IE how to reach your credit PEAKS before big ticket purchases.

 

 

  • In your experience, what boosts your credit score?
  • what hurts your credit score?
  • how do you time your credit score troughs and peaks?
  • since a credit score of 740+ is the same for getting the best mortgage/ car loan rate, would you be willing to carry some 0% credit card debt and forego your 780 credit score?
  • how do you use credit cards to your advantage? save you interest on student loans? cash back? free admission to museums? maximize your retirement savings?

Comment below!

Timing Credit Trough’s
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2 thoughts on “Timing Credit Trough’s

  • May 26, 2015 at 12:43 pm
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    Is there really no advantage to having a higher credit score than 740? I guess I have been timing my credit as I am up to 785 and trying to refinance my student loans at the moment, and kind of sucks that the 785 doesn’t help me as much as I thought it would! I pay my credit debt on time at the latest possible date to maximize the time my money makes interest in my accounts. I use a cash back card for all my purchases…I never understood paying for essentials with cash when you can get money back!

    Reply
    • May 29, 2015 at 11:11 am
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      awesome work! yes from my experiences in applying and/or qualifying for various loans (BOA doctor’s mortgage, BOA conventional mortgage, mortgage refinancing with a smaller company, car loan, car loan refinancing, COMPASS doctor’s mortgage); every single finance officer told me that 740 and above credit score gets the best rate.
      unfortunately with current student loan refi, it’s nearly impossible for MOST residents. i actually attempted to refi my student loans a couple months as ago when i still had 15k student loan balance. however, with a 740+ credit score and that little bit of student loan, they would not qualify me for the refi. Even with a cosigner, they would only refi me at a 4.5% interest rate for 5 years fixed, 2.9% rate for a 5 year variable (rate adjusting every 3 months). i was pretty unhappy with what i found out. so i just went ahead and took refi into my own hands. i used my credit limit to pay off my student loan. the debt shifted from student loan to credit card is currently interest free, for another year.

      Reply

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