Timing between loans and applying for a new credit card

Question

Here's the skinny. I can get answers out of a variety of the question threads here, but putting it all together is a bit of a different matter.

Bought a house 18 months ago. Put 20% down, got a 3.5% rate, really happy with that.

Main vehicle was on its last legs, I bought a used car to replace it in May of last year. Has like a 2.2% but the net financing cost (5yr) is going to work out to 20% of the purchase price. It's our only car now.

Have the following cards:

• BOA - Had this one for over 10 years. Credit limit ~20k
• Discover - Around six years I think? Credit limit ~16k (just went up)
• Chase - Had this one nearly 10 years, credit limit started/stayed at 5k. I've only really used it for balance transfer offers
• Costco AMEX - About two years, limit 10k
• Store card (Capital One) - We only use this for same-as-cash purchasing, about 3k on it with 10k limit

Basically, I'm using the Discover for daily activity, but I know the reward rate is pretty meager (I'm probably getting a net of $250 Amazon credit a year maybe?). I was thinking I might apply for an airline card. So, two questions:

1. Should I wait to apply for the card until it's been a year or longer after the car loan? I've never missed a payment on anything, but I know that after getting the mortgage, my low-800 score took a big hit and when I got the car my score was somewhere closer to 690 (going off memory, could be wrong). Haven't checked it since then.

2. Should I close the Chase card before/after I apply? I know that closing it will make my overall utilization go up (see below) but I don't want to appear over-extended.

Answer 1

There were several areas where the mortgage and car loan have affected your credit. The mortgage had the following impacts,

• new credit (biggest effect for 3 months to 1 year)
• (average) age of credit (big effect from mortgage)
• credit diversity (improved with inclusion of mortgage loan)

The car loan (purchased shortly after the house) had the following impacts,

• new credit (biggest effect for 3 months to 1 year)
• (average) age of credit (another new credit line in just a few months)
• credit diversity (improved with advent of car installment loan)

You did not mention your payment history, but since you had an 800 prior to the house purchase, we can assume that your payment history is current (nothing late).

You did not mention your credit utilization, but you want to keep your utilization low (various experts suggest 10%, 20% and 30% as thresholds). The down payment on the house likely drained your available funds, and replacing the car may have also put stress on your funds. And when you buy a house, often there are additional expenses that further strain budgets.

My guess is that your utilization percentage has increased. My suggestion would be to reduce your utilization ratio on your revolving accounts. And since you have plenty of credit lines, you might want to payoff the car.

Your Chase card has a good age, which helps with age of credit, and though you will find experts that say you should only have 2-4 revolving accounts (credit cards), other experience shows that having accounts with age on them is a good thing. And having a larger number of accounts does not cause problems (unless you have higher utilization or you miss payments).

You did not mention whether the Chase card has any fees or expenses, as that would be a reason to either negotiate with Chase to reduce or eliminate the fees, or to cancel the card.

Have you checked your credit report for errors? You can get a free report from each of the three bureaus once per year.