jakeru's Micro AOR [@ 12 mos; new round of existing account BTs underway!]

Initial Thoughts / Questions: [moved down here from OP for preservation]

I want to keep my credit from being trashed to the point I wouldn't be able to qualify for the best mortgage rates. I currently have 80% LTV WAMU Mortgage: 10/1 IO ARM @ 5.375% until 2017. Bought first house in March '07. It is important for me to remain able to pounce on refiancing if rates drop low enough. Therefore I am uninterested in large number of applications. (Comfortable around 6 or a little higher...)

1. Currently have a Hard Pull CLI request pending with Citi 1/28 (requested $42k -> $55k, got "7-10 days" response). If successful, would be new largest line. Might be worth waiting for results before pulling trigger on rest of AOR. Statement cycles (reporting updated credit line, if any) on the 11th.

2. Looking to establish large lines with AMEX and Chase. For each, which is a better strategy: do multiple apps and consolidate, or request large BT on application? Does anyone have experience with requesting large BTs on apps with these issuers as new or ex- customer?

HHI = 165k including wife, $105k+ easily documentable without (wife on leave of absence while caring for our first baby; last documented income ~2 years ago)

3. My Citi card has 12-month 0% BT offer available, but must pull trigger by mid-March. I see two general strategies as a result:
A. Pull trigger on AOR now, as soon as Citi results are in, initiate the Citi BT
B. Pull trigger on Citi BT now. Defer AOR until later (at least until April.) Pros: all new accounts and most inquiries would then be aged > 12 months. Could be added as AU back on Wife's CapOne upon 4/27. Waiting would result in some juicy pre-approveds expiring, but if did conservative utilization (49%) pre-approveds would probably keep flooding in. I could also profit from 2 more months of BOA 100% utilization rolling BT, and/or experiment with billpay to HELOC.

4. With HELOC rates dropping below wife's student loan rates, am pondering paying off the student loan off early. Want to maintain a 6 month living expense liquidity cushion, which I estimate to be about $22k. I am the only income source, so desire an am ample liquidity cushion (6 months+) in scenario of 0% rate reset. Right now if I had to pay off all credit card balances, there would be a $25k liquidity cushion on the HELOC. If wife returned to work for the year, student loan debt would no longer be tax deductable, and wife's student loan rate would be equivalent to ~7.7% deductable (IE: HELOC) debt. Am I being too conservative? When should I pull trigger to pay down wife S/L debt, and for how much (all at once or gradually over several months?)

In the last few months, we have been able to pay our debt down (or make other investments) at a rate of about $2k+ / month.

5. Currently using WAMU online savings for excess borrowed BT funds. Will consider applying for other high yield savings if forcasted BT borrowing exceeds $100k FDIC limit. (update: Wa Mu account is joint so actually has $200 insured limit.)

6. At this time, Wife is not too amenable to doing more apps herself, views it as risky I think. Maybe at some point in the future she will come around to the idea, just not now.

7. Not willing to cross the business credit bridge without doing so ethically and legally. I don't have any businesses currently on the books, but perhaps in the future could cross that bridge. (Currently the filings, fees, tax reporting for properly opening new business seem too time consuming.)

8. I will likely not want to exceed 49% individual utilization, except for in between statement cycles, or on very rare occasions. I want to take more of a rolling BT approach and interested in the occasional juicy pre-approved offer.

9. Have done rolling (in between statement) approach with BOA NEA, as well as CapOne (back when the purchase checks were rolling in, it worked great) and both worked well, I have it down. 100% utilization with 0% reporting but I pay the BT fee each month. Very interested in any other opportunities for rolling 100% (Chase $0 fee and also Citi, I'm wondering if I could make it work for this...)

10. Perhaps rather than getting a new BOA 0% BT card, I should reallocate CL to my Billpay and use it to borrow funds. (Maybe I could transfer large balance monthly to my WAMU HELOC, paying it off each stmt close.)

11. Just got an offer from BOA to "upgrade" my NEA Visa to "Visa Signature". Idea how I can capitalize on this: allow the conversion (provided it doesn't result in hard pull, or age being reset on credit report) and it should continue to report my at least $42k high balance, but no longer report the credit limit. Then, reallocate the limit to another BOA card. (increasing the overall credit limit apparent on my credit report.)

----------------------------

SweetCash said: I'm curious about your rolling strategy to do BTs using the BoA NEA card. Does this mean that every month when you do a BT on the BoA NEA card you have to pay the $30 BT fee?

Yes. Right after stmt close I use a convenience check to deposit (and I take the util right up to 100% util, allowing for the $30 fee of course) into my WAMU online savings. Take the interest effective (after-tax) earned interest, subtract the $30 transfer fee, gets you the profit. When the Online savings was 5% and I had $42k CL, I recall it was about about $90 per month profit. I recently got a CLI to $45k. Not only was this strategy more profitable than my "BT and hold" experiments, but gave higher credit scores. (See this post for details.)

Low transfer fees are very important for a good rolling BT card. High credit lines and ability to control timing of the borrow and payback event help over come the fees. (You want to borrow right after stmt close, and pay back right before stmt close to maximize your earned interest.)

I am VERY interested in the seemingly rare, 0% 12 month, $0-BT fee ("with the 0% offer", not just on application), Chase pre-approved offer I got... Now the question is, given that I currently have no open Chase accounts... how can I maximize the CL that they give me to play with?

I have also not yet experimented with using citi for rolling 0%, but perhaps! (I am not sure if I use their 0% BT offer, if it becomes no longer available? IE: can you use it just once or multiple times?)

I'm a little jittery about relying on BOA billpay for rolling 0%, with the possible upcoming changes in terms (come April). So maybe I should just plan to apply for another $30 BT fee NEA card as I know what works.

If you're serious about the idea of refinancing soon, I wouldn't do anything for about 6 months, until you refi, or give up on interest rates.

On a more minor note, The Sony card is probably only good for $150 off at SonyStyle, no?

Six inquiries, six new accounts, and 3-6 significant new balances. There will be a score drop. I don't know how big, but a definite drop. You could recover most of that by paying down balances, but that will take a while. I don't follow the mortgage market, but I understand that recently, it pays to be opportunistic, as some mortage rates were changing by 1% during the course of the day.

Business cards would not have as much impact, as only the inquiries would show up, not accounts or balances.

1500 Sony points are not worth $150. More like $15. At other times, Chase/Sony has offered $100 or $150 (cash money) bonuses, which is why the card was so popular on so many AORs.

I have a hunch that 1 chase app wouldn't get you to their maximum exposure limit by itself. It usually takes 3-4 cards until you max out with them (once you get the cards, consolidate into one giant one, and BT).

markkundinger said: Six inquiries, six new accounts,

yes and yes...

markkundinger said: and 3-6 significant new balances. There will be a score drop. I don't know how big, but a definite drop. You could recover most of that by paying down balances, but that will take a while.

Unless I adopt a rolling BT strategy, as I have found I can apply successfully to BOA and CapOne in the past. It might work well on the $0 bt fee chase card. Any card that only has BT 0% "with application" or a few weeks after application (IE: the AMEX blue pre-approved) is not rolling-BT compatible, however I could always stay conservative on utilization (request large BT on app, then after they determine the size of the CL, pay down to 49% or even a more conservative 34%)

markkundinger said: I don't follow the mortgage market, but I understand that recently, it pays to be opportunistic, as some mortage rates were changing by 1% during the course of the day.

Business cards would not have as much impact, as only the inquiries would show up, not accounts or balances.

You have a point on being ready to go at the drop of a hat on the mortgage refi. Rates can, and sometimes do fluxuate quite rapidly. (And it takes a small rate difference to provide a large expected refinance profit.) And it would take a few days at the very least for a paid off balance to reflect on all three credit reports.

On that note, I just researched in my HELOC agreement, that there is an account cancellation fee of $500 if the account is cancelled within three years of account opening. So, that is about 2 years left to go. WAMU can resubordinate the HELOC to another primary mortgage. They disclose a resubordination fee of $50-$200, but I have a feeling they may waive it if I refi'ed to another WAMU primary. (I've also got a VERY good loan office hook-up there so could get more info and even a fresh rate sheet.)

markkundinger said: 1500 Sony points are not worth $150. More like $15. At other times, Chase/Sony has offered $100 or $150 (cash money) bonuses, which is why the card was so popular on so many AORs.

I have a hunch that 1 chase app wouldn't get you to their maximum exposure limit by itself. It usually takes 3-4 cards until you max out with them (once you get the cards, consolidate into one giant one, and BT).

Thanks for pointing out the difference between cash and points bonus on the Sony card... very good to know And you are right, it looks like all my old links for Chase Sony have the cash bonus offers dried up.

re: chase exposure, thanks for your input on the hunch of 3-4 chase apps being needed for max exposure.

I wonder if I could be successful in consolidating brand-new opened chase credit cards without the new account ever hitting the credit reports? That would be a cool way to get a large line from them out of the gate, if it worked. I don't know if it would be wise however for me to spend quite that many new reported apps & inquiries just for chase. The freedom would be useful as a "non-AMEX" backup card to have, for daily spending so I could get some additional value out of that for the purchase rewards.

I wonder if it might be a better strategy for me to just do a single Chase app, and request large, hard-pull CLIs on it later. That strategy has worked well for getting a large single and first Citi account; but I also had to provide docs, and it has taken some time and patience. I also used the account as a daily spender so looked like a profitable customer to them at the time of the CLI. I am OK with it taking some time; I'm in this for the long haul.

I agree getting those big lines is rarely possible.
Penfed might give you the requested 50k.They are conservative but you have few cards and big limits.
The other place to look maybe Nasa credit union as they offer a 2% CashBack visa and 50k is their highest limit.
But be aware they may ask for docs and nasa has a tendecy to pull all 3.

Thanks for the feedback, guys.

I got an interesting solicitation from BOA in the mail yesterday, re: my NEA Worldpoints Visa:
"Your upgrade to the Visa Signature card is confirmed" "Congratulations. you have earned an account upgrade to the NEA Visa Signature card. You can now enjoy a higher level of service and a superior rewards program at no extra cost. Simply call or send back the form below so we can send your new card."

The form is very straightforward and basically just "authorizes" upgrade (no disclaimer about application for credit, review of credit, etc.)

Usually, I wouldn't think this "upgrade" would be worth a lot, because I already have the (1% "ho-hum") WorldPoints rewards on my non-Signature card, and my understanding of the "upgrade" to NPSSL, means the credit limit stops being reported.

I'm thinking however I might be able to capitalize this by allowing the upgrade, which should still cause my $42k+ high balance to be reported (and used instead of credit limit for credit score utilization calculation). I could then later reallocate the credit limit (but keep open) to another card, and it with the limit no longer being reported, would give the apparent effect of my combined credit limits with BOA being increased. (Benefiting me by improving overall utilization.)

also markkundinger: my sense is that the current mortgage rate to refinance without closing costs would be about 1/8 - 1/4% higher than what I've got now. (That is a guess based on looking at the wholesale mortgage rates, and figuring retail rates are going to be a little more costly.) So basically, there is a probability that a mortgage refi could benefit me at some point in the future (it's neither an slam-dunk "yes" or "no".) The reason the HELOC fees are important, is if I refi'ed the primary mortgage, the HELOC in a subordinate lein position to the new primary mortgage, would need to be closed (costing $500 cancellation fee) or resubordinated (also possibly costing a fee, not entirely sure how it's calculated.) I have a feeling I might be able to swing a deal with my mortgage loan offier at WAMU however, if I re-fi'ed with them, to waive the HELOC resubordination fees.

On researching mortgage guidelines further, it seems that 740 FICO is the target I need to stay above to qualify for the best mortgage rates.

If you use TrueCredit you can see how much available credit you have. My chase freedom has a high bal. of 14,600 and it is not used in my available credit on TrueCredit. After I moved the credit line to the chase handyman the calculation was correct. So I now have a 1,000 chase freedom that still has no preset spending limit. Not that it does much good.

So I think it's an old wives tale that they calculate using high balance.

I've done the NPSL trick also (with a MBNA/FIA Fidelty). Got the balance up to $20k briefly, have since reallocated away and am down around a $4k non-reporting limit.

And my experience with TrueCredit does not match win333's friend. I just checked on myself. TrueCredit reports balances of $90544. If I add up just my reporting credit lines, I get $153250. If you toss in the "high balance", I'm looking at $173861.

Truecredits "available credit" graph, while I can make out the exact numbers, shows a little over $80k available credit. That's only possible if the NPSL card's "high balance" is getting reported.

FYI:
I pulled all three reports directly from the big three, not from TC or any third party. No where on TU or EX does it show utilization or percentage used. On EQ it does show utilization and what they call “High Credit” is not figured into it.

win333 said: Rorer714 said: FYI:
I pulled all three reports directly from the big three, not from TC or any third party. No where on TU or EX does it show utilization or percentage used. On EQ it does show utilization and what they call “High Credit” is not figured into it.


TC shows your balance and you Available.
The point I was trying to make was third party reports show all types of things, but they are completely useless. What your actual reports show is the important factor. With that said I have yet to find any credible information on what the credit card company’s actual get when they pull your report. Do they get compiled data or just raw data and use their own matrix (utilization, DTI, ect.)?

tolamapS: Did you know you can basically buy as low of a rate as you desire from a bank, provided you are willing to pay enough points / closing costs? Bankrate's "lowest" quoted rates invariably are always the ones that have MONSTER (IE: we're talking 3+ points worth, or several thousand dollars) of closing costs. These rates are of very little utility to me for judge whether it's time to refiance. Bankrate's rate tracking service is also pretty worthless in general, because it compares loans of varying closing costs, IE: it is not apples to apples.

The most relevant rates for my refi decision are those available through retail channels, of an equal or more desirable product (IE: longer fixed term), without closing costs, no other "gotchas" such as pre-payment penalties, etc.

Mortgage professor's wholesale rates ARE for no closing costs, and DO compare apples to apples (all loans compared are for the stated cost criteria), however you've GOT to figure that there is going to be a certain degree of markup for the retail channel.

According from a WA MU loan officer source, their "employee discount" for mortgages was 1 point of closing cost below their retail price. Therefore I believe that could be indicative of roughly how much their prices are above wholesale. It would be interesting to compare a current rate sheet with current wholesale rates off mtg professor's site and see exactly how large the markup really is.

re: which mortgage products would work for me, I would NOT be comfortable (and qualifying may even be a long shot) for the monthly payments of a 15 year amoritzation period. However I should be able to qualify for a fully amortizing (IE: non-interest only) 30 year. There is some extra value of an interest-only product to me however, because 1. I can pay off higher rate debt more quickly (IE: wife's student loan, HELOC, etc) 2. reduces my minimum monthly obligation, allowing me to allow less emergency funds comfortably.

The answer to the question of how much lower does the rate need to be to make it worthwhile to refinance, is anything lower is worth it, provided all the risks are removed IE: same (or more desirable) mortgage product, no closing costs, no prepayment penalties, etc.

Thanks for your guidance as to the new accounts likely causing the most impact on my credit scores (versus new inquiries)... this has likewise been my feeling as well, and is why I would prefer to limit my number of new account applications.

As to why I am not planning a business AOR, (I thought this would be the first question to come up!) which is why I included comment #7 in my OP.

All:
The CapOne AU account fell off my TU report over the weekend, causing no change in the PM123/TC TU FAKO.

Today the pre-approved Chase Disney, 15-month 0% $50 bt fee expires. (Which I feel was the right thing to do, with the pending Citi CLI and BOA "signature upgrade".)

Thanks again for your effort to review my plans and provide your comments.

Six inquiries will not do a lot of damage, especially spread out among CRAs, but new accounts will decrease average age (since you have so few currently) and high balances for sure will hurt your score! Without high balances, on the other hand, AOR is not worth it. You seem all aligned for it - I'd say go for it, but keep in mind that you may not be able to refi. You could also focus on cards with capped or no BT fee, so that you could pay them off, refi, and BT again.

I would be very careful with NPSL cards. Sure, you can have them report high balance once and then use it in place of credit limit, but occasionally some CRAs seem to "forget" historical high limit. Happened every month with my BofA cards - either on EX or EQ, I do not recall now (and my BofA cards are closed). But having CRAs "remember" historical high limit may be even worse (and this applies to all cards, not just NPSL): I've read reports here that your credit score (perhaps only TU?) is lowered considerably for having high balance above current credit limit, which happens very easily as a result of re-allocations or credit line decreases by the lender.

As I started typing this I started a new business, oops I just started another 1. Like I said above " your waaaaaaaaaaaaaaay over thinking this".

Ooops Just started another 1, Thats 3 new businesses in the time it took to type this post.

When a business starts it is just a vision, most apps ask nothing about the business. I have 3 CRAP1 offers right now, they do not ask for revenue or income. You are the one that is making these rules that you are holding yourself too!

All they want is your SS#, thats it. Take the money and run!

jakeru said: Win333 - does your local jurisdiction (IE: city, country) have requirements for licensing a legitimate business? Mine does. How about your state?You are confusing two concepts here -- licensing and registering a business. You only need to license something if you engage in an activity that requires you to do this, such as selling liquor, etc... You do NOT, however, need to obtain a license to sell things on eBay, lend money through prosper, etc...

As for registering a business, you absolutely are NOT required to register a sole proprietorship with any state, federal or local organization. You are likewise not required to obtain an EIN and can simply use your SSN as the taxpayer identification number.

Are you going to file all the required taxes for each of your businesses? Are business tax filings required by your State? They certainly are required for Federal tax filing, best as I understand it. Are you going to evade federal taxes and risk being audited?As a sole proprietor you report all business income or losses on your personal income tax return; the business itself is not taxed separately, since the taxation here is pass through. The main difference between income from your sole proprietorship and reporting wages from a job is that you must list your business's profit or loss information on Schedule C (Profit or Loss from a Business), which you will submit to the IRS along with Form 1040. If your sole priprietorship has had no income and no expenses to report on Schedule C, what exactly is the problem?

geo123 said:
As for registering a business, you absolutely are NOT required to register a sole proprietorship with any state, federal or local organization. You are likewise not required to obtain an EIN and can simply use your SSN as the taxpayer identification number.

Geo, I think at least in some states your business is required to be registered with the state (even if sole proprietorship) depending on what the nature of the business is. E.g., investment consulting must be registered, but fitness consulting does not have to be. Please correct me if I'm wrong. Does this registration require passing on financial/tax info -- I don't know ... but it certainly makes state more aware of your business ...

cyberkost said: Geo, I think at least in some states your business is required to be registered with the state (even if sole proprietorship) depending on what the nature of the business is. E.g., investment consulting must be registered, but fitness consulting does not have to be. Please correct me if I'm wrong. Does this registration require passing on financial/tax info -- I don't know ... but it certainly makes state more aware of your business ...Correct, but again, this has to do with licensing, not registration. You typically have to be licensed to sell liquor, offer cosmetology services, practice dentistry, etc... Licensing is used to ensure that certain professions comply with the minimum professional and educational standards established by the state in question. Hence, for licensing purposes, it typically does not matter what type of entity you are operating, if any. Registration has nothing to do with professional or educational standards, which is the reason that sole proprietorships typically do not have to be registered with the state but, depending on the nature of their activities, have to be licensed.

So do you have to be Lic. to rent out a room in your home, be creative if your putting 0 rev and 0 income on your app and someone gives you a 25,000 credit line, WTF is the problem. You've just been wasting space here and not reading AT ALL.

Thanks GEO you are 100% correct, some business don't need to file squat. I guess Jakeru wants to be a brain surgeon and he needs to register.

I was doing my reading here and NY state seems to throw licenses and registrations into one bucket called "permits". I don't think it matters what kind of papers a business has to file with the state. What matters is that just being a sole proprietor does not necessarily free you up from filing papers with the state. The answer depends on the state and/or the nature of your business. And once one files any kind of papers with the state one better be in shape for all sorts of audits and checks, because state now knows one is out there ...

What is also true is that many state web-sites on "helping" start a small business make it look as if one has to file a gazillion papers and pay a whole bunch of fees (states want your money even if your business does not make any), whereas the letter of the law does not require you to (though does not preclude from either). This may well be Jakeru's case ...

jakeru said: Here are also guidelines from the IRS on how they recommend keeping records for a business.Sorry, what does this have to do with the question that we are discussing? As far as the IRS is concerned, you need to keep records to substantiate income, deductions, depreciation, etc... If I am thinking of creating a sole proprietorship which will consist of me sitting on the couch eating potato chips all day, what records do you think I should keep? Do you think I should get licensed as well?

Believe it or not, this is a (semi) serious question. After all, if I decided to organize an LLC for this purpose, for instance, I would have had to register it with the state.