Credit card?

[JonB]

Ok here's the deal. I'm about to by my first house I am in a good paying job in a stable company and have a small nest egg even after the down payment, but this home is a foreclosure. Its not in bad shape at all for a foreclosure, inspector actually praised the home and said it was a great home for the money but it still needs a lot to make it a home. Such as all the appliances, furniture, blinds, curtains ect ect ect the house is pretty much bare. I pretty much need everything except bedroom set, tv, and washer dryer. I plan on paying for all of the above with my nest egg which will still leave some left(I plan on building it back up as fast as possible once we get settled) for minor emergencies.

Here's where the credit card comes in, should I apply for a higher limit credit card like say 10k for any major issues that may arise? I currently have a 1k credit card limit that I've had since i was 18 and I occasionally use it just to use it. I don't really buy anything unless I can pay for it then and there. I have an excellent credit score 802 to be exact and I don't plan on using this card for anything other than major home issues that may arise self control with money is no problem for me. My main question or concern is with the home loan, will applying for a 10k credit card raise a red flag at the credit union if I do it before my loan is complete and I close on the home? Should I wait till I close then do it? Or would doing this actually help my interest rate as it is not locked in yet as it would lower my

debt-to-credit ratio?

[FasstChevys]

It sounds like to me you should just wait until you close to do it. I don't think it would help your interest rate. Your credit score is already 800+.

[wileyCoyote]

congrats on your good credit score! however, when you say "nest egg", are you talking a retirement account?... i'd advise against using retirement money, especially if a 401k or roth ira.. as for the card, it might actually be better, in proving worthiness to lenders, if you have a higher credit limit that you pay off balances on..

[JonB]

congrats on your good credit score! however, when you say "nest egg", are you talking a retirement account?... i'd advise against using retirement money, especially if a 401k or roth ira.. as for the card, it might actually be better, in proving worthiness to lenders, if you have a higher credit limit that you pay off balances on..

I was actually kinda surprised on my credit score I did't think it was that high. Not that I thought I had bad credit but I really don't have any big purchases just rent, bills and car payments. No no not my retirement or 401k just money that is in my savings account. That's what I was thinking about the card as well but at this point I don't think it will really help as I close in 30days but I think I am still going to do it just so I have it for if I ever need it.

[wileyCoyote]

I was actually kinda surprised on my credit score I did't think it was that high. Not that I thought I had bad credit but I really don't have any big purchases just rent, bills and car payments. No no not my retirement or 401k just money that is in my savings account. That's what I was thinking about the card as well but at this point I don't think it will really help as I close in 30days but I think I am still going to do it just so I have it for if I ever need it.

oh, ok, ..well then i'd say you're in good shape! if you pay off your bills and credit cards every month, no liens, etc,. you'll probably have a good credit score.. i'd try to get a higher credit limit on your card though, regardelss... a 1k limit is way too low (i'm also assuming you just have one card?), ...a 10k limit is completely reasonable for someone w/ your score.. i think one of my cards, my limit is 25k!

[tremiles]

Most furniture and appliance stores will finance you for 12-24 mos with no interest if you pay it off within the 12-24 mos. time and make monthly payments. However, if you don't pay it within the term or of you are late with a monthly payment, they will charge interest on the whole purchase amount. If you can make sure you pay it off on time, you'll save alot of money vs. a traditional bank credit card.

Sent from my DROID2 using Tapatalk

[allbaugh_04]

Our furniture store does 30 months 0% financing. Couldn't pass it up, so I left my nest egg alone. You should try to do the same. I would do just about anything to avoid a credit card.

My score is close to yours as well, I've never used one in my life, so I'd avoid it.

Even if anything comes up, try to avoid touching the nest egg. Almost every place offers financing. Even an HVAC place will. Just don't get in over your head on it.

[SiggyZ]

Store cards and financing help boost your credit rating better than credit cards. I'm also a member of the 800 club.

[JonB]

Our furniture store does 30 months 0% financing. Couldn't pass it up, so I left my nest egg alone. You should try to do the same. I would do just about anything to avoid a credit card.

My score is close to yours as well, I've never used one in my life, so I'd avoid it.

Even if anything comes up, try to avoid touching the nest egg. Almost every place offers financing. Even an HVAC place will. Just don't get in over your head on it.

I had actually not really thought about that. Its just against everything that I ever try to do when buying stuff, I am just one of those people that hates owing money. I guess financing the furniture and appliances would not be a bad I idea if I can get 0% since I will easily be able to pay them off with in 12months or less without dipping into savings.

[35th-ANV-SS]

Since no one else mentioned it, what kind of nest egg are we talking about here in general terms? If you are talking about something like 25K+ in "savings", that money would be much better suited in some sort of retirement avenue.

Rule of thumb is to have 3 months of income in liquid assets at any given time, but most financial advisers will tell you 1 month is usually plenty.

If your house passed inspection with flying colors, I wouldn't be too concerned with any huge "investments" needing to be made anytime soon. Big ticket items are the roof, AC, and furnace. Most other things are cosmetic.

And, I agree with financing the furniture and other necessary appliances through the actual store you are purchasing them from if they offer the 0% free financing. Just be sure to budget the payments to where you have it paid off prior to the term expiring.

I used a 0% for 18 months CC for my supercharger build. I have it planned out to be paid off 2 months early (Oct of 2012).

[TLS_Addict]

Do you currently have a vehicle payment? I am betting no.

The reason your credit is high is because you have multiple "lines" of credit so far with your bills. Not to burst your bubble my my 22 year old fiance had a 791 score and she never had a vehicle payment or anything other than a cable bill in her name. She does have a credit card but its in her fathers name first and then hers. Its not as hard as people think to have an 800 score.

Now if you had a vehicle payment and say 5k in credit debt the bank would look at you (depending on the loan and the credit card debt) and say that you have a good ratio of income to debt if say you make 50k+ and have less than 10k in total debt. A car loan can take 50+ points off your credit score.

Not using a credit card is bad btw...............the best bet is to USE the card and then pay it off when you get the statement. It shows that you will use it, can make payments, and that you dont leave any debt out there lingering around. Whatever you do DO NOT CLOSE THAT FIRST CARD. Open another one if you want or raise the limit on that one but dont close it. Your score WILL GO DOWN if you do.

[TLS_Addict]

Since no one else mentioned it, what kind of nest egg are we talking about here in general terms? If you are talking about something like 25K+ in "savings", that money would be much better suited in some sort of retirement avenue.

Unless he can take a loan against it, put it back, and not lose anything. Why not pay yourself? You were not taxed on that money when you put it in so why not let it work for you now?

You are right about the 0% financing rates.

[35th-ANV-SS]

Unless he can take a loan against it, put it back, and not lose anything. Why not pay yourself? You were not taxed on that money when you put it in so why not let it work for you now?

You are right about the 0% financing rates.

I am confused at what you are saying here. How exactly are you paying yourself with money in a "savings" account? Money in a savings account is not working for you. If you don't need it, invest it. Pretty simple.

[TLS_Addict]

I am confused at what you are saying here. How exactly are you paying yourself with money in a "savings" account? Money in a savings account is not working for you. If you don't need it, invest it. Pretty simple.

What is there to be confused about? You put the money in pre-taxation and it has been building. When you take a loan out against that and you put it back with money you are making now that is taxed you WILL make out better in the end. Reason? The interest on what you will gain from what you put back in will be offset by the interest you pay on taking that loan from your own account. You dont get that with a regular loan. Thus, you dont lose as much money on the total transaction by taking a loan out on your own money.

Do the loan both ways, factor in all the variations of interest and see which one comes out on top.

Think of it this way.

If I have a loan for 20k structured like a vehicle loan is at 5% for 5 years the payment each month is how much? This is tax excluded on the 20k, just strait 20k. The payment per month is $384.96. If the loan was just given to you and you put the money in an account (essentially what would be when you pay BACK on your 401k just at a lower rate level) and you got even 1% ROR you make out in the end. See what I am getting at? Though his 401k would take the hit. as money goes back in he would see an increase just due to the interest gained on his payment.

[35th-ANV-SS]

What is there to be confused about? You put the money in pre-taxation and it has been building. When you take a loan out against that and you put it back with money you are making now that is taxed you WILL make out better in the end. Reason? The interest on what you will gain from what you put back in will be offset by the interest you pay on taking that loan from your own account. You dont get that with a regular loan. Thus, you dont lose as much money on the total transaction by taking a loan out on your own money.

Do the loan both ways, factor in all the variations of interest and see which one comes out on top.

Think of it this way.

If I have a loan for 20k structured like a vehicle loan is at 5% for 5 years the payment each month is how much? This is tax excluded on the 20k, just strait 20k. The payment per month is $384.96. If the loan was just given to you and you put the money in an account (essentially what would be when you pay BACK on your 401k just at a lower rate level) and you got even 1% ROR you make out in the end. See what I am getting at? Though his 401k would take the hit. as money goes back in he would see an increase just due to the interest gained on his payment.

I am talking about a "SAVINGS" account and you are talking about a 401K.

NOTHING alike.

[35th-ANV-SS]

When I speak of savings account, I am talking about having money in just that, a savings account at a bank. Similar to a checking account, but in savings.

[TLS_Addict]

I am talking about a "SAVINGS" account and you are talking about a 401K.

NOTHING alike.

Not entirely true. A 401k IS a saving but its pre-taxed based. Which highly offsets the tax you pay on what you put in to your "savings" account.

I do agree that you should have SOME money in the bank or at a minimum some assets you can unload quickly.

When I speak of savings account, I am talking about having money in just that, a savings account at a bank. Similar to a checking account, but in savings.

I get that. I wouldnt drain my 401k or my savings if I was the OP.

Sounds like its a decent house so why not do just a little bit at a time? Spend 1k here then 1k here a few months later. Wouldnt you?

[35th-ANV-SS]

I think you misunderstood what I was getting at Dan. Nobody should have a large egg nest in a bank savings account was my point. A smart investor will have his money invested in avenues that will make money for him in the long run. Having a lot of money in a typical savings account will not do that for you was what I was getting at.

The only reason I have any kind of savings that I can pull from at my bank is in the event I lose my job. Otherwise, emergencies all go on credit, which I pay off monthly. I have 0 debt other than my house, my supercharger build, and my Impala. No CC debt otherwise. All of my assets are tied up in Roth IRA's, 401K, and a few other long-term saving vehicles for retirement.

I would never touch any money from my 401K. Yes, I understand you can loan against it if needed and pay yourself back. If you can afford to pay yourself back though, then there really is no need to touch your 401K in the 1st place. Open up a 0% interest CC and go that route.

Also agree that with any house purchase, it normally is a long-term investment. Fix it up at your own pace you feel comfortable with and can afford. It's taken me 8 years to have my house where it is to date; new house roof, furnace, AC, 2 fully rebuilt bathrooms, new furniture and appliances, new garage roof/siding/gutters, new privacy fence, a newly built deck, etc. I usually do (1) big project a year. Obviously something like a furnace is a necessity though and if it goes out, you cannot wait to get it repaired/replaced.

People usually go into their 401K for something large such as school.

The OP has already stated they have a large nest egg for a down payment and will have "reserves" after the down payment. If they have done their homework on what owning a house cost "truly is", and can afford that on pure salary quite easily, there is no need to have a large sum in the bank for emergencies in my opinion.

And for the record, you get about .1% interest (yes, less than 1%) on a savings account in a bank. I've been earning, on average over the last 12 years, a 12% return on my 401K. In that aspect, the two are nothing alike.

I'm quite versed on saving avenues. I've been planning/saving for my retirement since I was 17 and doing quite well with it to boot

[blackcar]

Do NOT apply for a credit card until after the sell closes on the home. With the new regulations on some loans the bank has to run your credit again right before closing. If anything "major" (I have asked but not got a clear definition of major) has changed the loan process starts all over.

Since you seem to be good with your money, you could always do like I do, after your loan closes. I have several credit cards I use for every day purchases like gas, eating out, and groceries. I use which ever one will get me the most money back. I pay the bills off every month so I do not pay any interest, and none of them have an annual fee, so it cost me the same as cash. The benefits are I do not have to carry as much cash with me, it is easier to keep track of your spending with the monthly statements, and I get money back. On my gas card alone I average $20/month. And of course they are always there if I need them, but only as a last resort. With credit as good as yours, if a bill came up for more than what you had I would look at a personal loan.

[TLS_Addict]

I think you misunderstood what I was getting at Dan. Nobody should have a large egg nest in a bank savings account was my point. A smart investor will have his money invested in avenues that will make money for him in the long run. Having a lot of money in a typical savings account will not do that for you was what I was getting at.

The only reason I have any kind of savings that I can pull from at my bank is in the event I lose my job. Otherwise, emergencies all go on credit, which I pay off monthly. I have 0 debt other than my house, my supercharger build, and my Impala. No CC debt otherwise. All of my assets are tied up in Roth IRA's, 401K, and a few other long-term saving vehicles for retirement.

I would never touch any money from my 401K. Yes, I understand you can loan against it if needed and pay yourself back. If you can afford to pay yourself back though, then there really is no need to touch your 401K in the 1st place. Open up a 0% interest CC and go that route.

Also agree that with any house purchase, it normally is a long-term investment. Fix it up at your own pace you feel comfortable with and can afford. It's taken me 8 years to have my house where it is to date; new house roof, furnace, AC, 2 fully rebuilt bathrooms, new furniture and appliances, new garage roof/siding/gutters, new privacy fence, a newly built deck, etc. I usually do (1) big project a year. Obviously something like a furnace is a necessity though and if it goes out, you cannot wait to get it repaired/replaced.

People usually go into their 401K for something large such as school.

The OP has already stated they have a large nest egg for a down payment and will have "reserves" after the down payment. If they have done their homework on what owning a house cost "truly is", and can afford that on pure salary quite easily, there is no need to have a large sum in the bank for emergencies in my opinion.

And for the record, you get about .1% interest (yes, less than 1%) on a savings account in a bank. I've been earning, on average over the last 12 years, a 12% return on my 401K. In that aspect, the two are nothing alike.

I'm quite versed on saving avenues. I've been planning/saving for my retirement since I was 17 and doing quite well with it to boot

I see what you are saying, Jon and am 100% behind you. A load of cash in a savings account is pretty stupid. Investing IS the way to go, no question there.

The smartest thing is to do what you did. Take his time fixing things. Spend a few k here, then maybe a few more there.......etc Doing it all at once has another draw back. If you go making the house look like a million bucks the ole' tax man will be by to assess it and hit you pretty hard. Ask me how I know.

There are just ways to minimize your losses when taking out loans and that is all I was trying to point out.

I used mine for school. It made it possible for me to have ZERO debt from college and I will make that money back in less than 2 years (with my current salary)..........and that is the net pay I get, not the gross.