Holidays and the Destruction of Credit Prior to Mortgage Application:

“If you open a credit card with the store today you will get 30% off” What they don’t know or tell you is you may wind up paying an extra $50,000 to $100,000 or more on your mortgage just because you opened a couple of new credit cards for a grand total of $200 in savings.

Let’s say John has a 790 Fico score and he is applying for a jumbo loan of $900,000 to purchase a co-op this spring in NYC. Due to his score being over a 780 he will save almost $50,000. Once he opens the new Bloomingdales and Lord & Taylor card his score drops to a 742. His average age of credit has reduced significantly since he has two brand new credit cards. This makes him a higher risk therefore reducing his scores. Now his $200 savings cost him $49,800!!! That’s a nice chunk of change. Always warn your clients about using strategy and timing before opening new credit.