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STOP! Before You Open That Store Charge Card To Save 15 Percent
December 19, 2008 by James K Barath, CMPS · Leave a Comment
During the holiday season, retailers bombard shoppers with at-the-register offers to “open a charge card and save 15%”.
It’s an immediate money-saver, but for Americans in the market for a new home loan, taking advantage of the in-store savings could be a long-term loser.
This is because new credit card applications are damaging to credit scores. According to myFICO.com, “new credit” accounts for 10 percent of a credit score; recent applications may signal weakness in a borrower’s profile.
Meanwhile, conforming mortgage lenders make rate adjustments for low credit scoring applicants. As an example, a home buyer with a 20 downpayment and a 715 credit score would face an interest rate adjustment of 0.125%.
Below 700, the adjustments are even worse.
It’s okay to take advantage of in-store savings during the holiday season, but be aware of how it may impact your credit score. If you’re not applying for a new home loan in the next six months, chances are that you’ll be alright.
But, if you will need a new home loan, consider whether saving 15 percent on a $200 purchase is worth it if the long-term cost is paying an extra 0.125 percent on your new mortgage.
(Image courtesy: myFICO.com)
About the Author: James K Barath is a Certified Mortgage Planning Specialist, qualified liability advisor and your FHA Home Loan Expert. He is also a graduate of Purdue University, The CMPS Institute, Dale Carnegie Human Relations Course & Napoleon Hill Foundation's PMA Science of Success Class. It's your home and your future. It's his profession and his passion. He is ready to work for your best interest. Contact James Barath today for your Borrow Smart Analysis - the CALM Approach to Borrowing ! His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy! 
