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cardamon

Furniture buying before loan closes

cardamon
11 years ago

I am closing on a loan in a few weeks. Today I ordered furniture. It is on credit so they can do a drop ship order because I don't live in the state I am buying in. It is a vacation home. I have cash in the bank, great credit etc. They did do a credit inquiry because I haven't used that card in years. have I hurt my chance of closing? Should I cancel the order and ask for a new letter of inquiry sign off? Thanks for any advice. Is there like a debt ratio thing and I'm worrying for nothing?

Comments (22)

  • terezosa / terriks
    11 years ago

    Maybe. The mortgage company will pull your credit again right before closing. If it was a substantial purchase it could make a difference.

  • mojomom
    11 years ago

    When do you expect the furniture to ship? Most companies don't run a cc charge through until the goods are shipped. If it is after closing, you may not have an issue at all. Could you call the merchant and find out when the charge will go through? If you expect the charge to go through before closing and were planning to pay it off at the end of the billing cycle, why don't you prepay the balance?

    But if the cc does show an amount owed when the final credit pull is made, it could cause a problem. Safest bet might be to cancel the order and place it again right after closing.

    Congratulations on the purchase! I remember how much fun we had furnishing our ski house -- the dining room chairs came in from Restoration Hardware at 4:00 in the afternoon the Wednesday before our first Thanksgiving there.

  • cardamon
    Original Author
    11 years ago

    Thanks Terricks and Mojomom. The furniture won't ship for 12 weeks. I believe it would be billed then. I wanted to do it now because of family's summer vacations and you need furniture. It seems to me I have no pro lem but I just don't know how banks view it. Thanks again. I probably better cancel it.

  • OttawaGardener
    11 years ago

    I thought a credit check was based on all available credit being used to the maximum. So this purchase would be irrelevent.

    This has come up on the Finance forum before, and is the reason I have canceled credit cards that weren't being used, and reduced credit limits.

  • cardamon
    Original Author
    11 years ago

    Ottawa thanks you made me feel a little better it is credit available. And my credit score is fine so I don't think it should be a problem. Thanks.

  • Northlut
    11 years ago

    I'm not an expert, so this comes with a few grains of salt.

    As far as I know, the credit card companies also don't immediately and continuously feed your balance to the reporting agencies, so I doubt it would show up right away. The admonition against big purchases before closing is more about opening new lines of credit, like financing furniture or appliances through the store.

  • brickeyee
    11 years ago

    "Most companies don't run a cc charge through until the goods are shipped."

    By federal law they are not allowed to.

  • mojomom
    11 years ago

    Brickeye, citation please?

  • kats_meow
    11 years ago

    I thought a credit check was based on all available credit being used to the maximum. So this purchase would be irrelevent.

    You thought wrong.

    What they will look at is credit utilization. That is actual credit utilized. Let's say you have $100k credit available and you have credit card balances totaling $5k. That is 5% utilization which won't hurt your credit at all. Let's say you think (wrongly) that having a lot of credit available is bad so you close $90k of unused credit leaving you with a $5k balance on $10k available which is 50% utilization. That will indeed hurt your credit.

    Also, they look at overall credit utilization plus utilization per card. It is "better" to have say 10% utilization on 5 cards rather than have 90% utilization on one card.

    As far as the OP's question, it will probably depend on whether this is billed before her closing. For example, I do most daily spending on my Amex bill but I pay it in full each month. So, I actually have zero ongoing credit card debt. However, if someone pulled my credit report right after my Amex card is billed it will report that as debt. The credit report has no way of knowing that I will be paying it in full so it will count against me just as much as it would if it was ongoing debt that I wasn't paying off in full.

    So, for people who plan to get a mortgage the usual recommendation is not to buy anything that would change their credit utilization at the time that the credit is checked right before closing.

    FWIW, with Amex you can pay your bill before it officially bills so you can buy something on credit and then pay it before it is billed so it never shows up on the credit report.

  • GreenDesigns
    11 years ago

    Just opening up that line of credit at the store could have impacted closing. (Any account that has to be "re-opened" was officially closed and will count as a new account.) It's too late to undo that, but you want to make sure that nothing is billed to that account until after your closing.

  • cardamon
    Original Author
    11 years ago

    I canceled the order within the 72 hours so I did not order it. Now I am just concerned about the credit inquiry because I wanted to use this store because they would drop ship in 12 weeks. So since nothing bought just the inquiry am I in loan trouble? It is just one of those stupid, stupid things I wish I didn't do and I just wanted to get that part (furniture) taken care of. I am just so mad at myself. When do they tell you it's a problem?

  • brickeyee
    11 years ago

    citation please?"

    Look it up yourself .
    It is very old.

    The law also sets the terms for CCs about disputes (60 days after you receive notice of the charge), limits on liability for fraudulent use ($50 in use before you notify the CC company), not allowed to report you as late if a charge is in dispute, etc.

    Or did you think those terms are solely by the grace of the CC issuers?

    It also allows any claims against the seller for defective goods or non delivery of goods to be asserted against the CC company when refusing to pay.

    The terms do NOT apply to debit cards (even if they bear a CC name) unless the issuer chooses to extend them as part of the contract. They are required for a CC.

    This is what can make debit cards dangerous to use.

    It is YOUR money that is 'missing' with a debit card, unlike with a CC that it is the banks money.

  • kats_meow
    11 years ago

    It is possible that a credit inquiry could lower your credit score by a few points. Unless it lowers you into a lower "band" where the rate you could get is lower it probably won't make a difference.

  • cardamon
    Original Author
    11 years ago

    Kats meow thanks. I did read 5 points somewhere. Hopefully an inquiry on an existing card that had been inactive for 3 years and very good credit will be alright. It's just that I don't know about banks now or how much difference that makes.

  • Northlut
    11 years ago

    Just call or email your lender and tell them what's going on. If they're any good, they should be able to let you know if it's an issue or not, and if it is, what you need to do.

  • OttawaGardener
    11 years ago

    Thanks, Kats Meow, for the correction. I don't know where I read what I posted, but it's either wrong or is Canadian rules.

  • mojomom
    11 years ago

    Brick eye, No one said anything about any of the other information you regurgitated.

    I'm asking for a specific citation to one federal reg or statute. I know I've had a charges processed for specialty items and custom orders from several reputable merchants that have required at least a deposit to be charged prior to processing an order.

    If you can't produce the citation to the "federal law" that says a merchant can't charge a cc until the goods are shipped, I'm just going to assume you made an uneducated statement and are trying to worm your way out by going on the offensive and changing the subject. If you do produce it I'll be woman enough to apologize too. 'nuff said.

  • cardamon
    Original Author
    11 years ago

    Thanks northlut first thing tomorrow I will do that. At my age I thought I had better sense and I still can't believe I did it when I knew I shouldn't. I'm mad at myself because I caused my own problem.

  • drewem
    11 years ago

    We have bought 3 houses, and are building a new one now. With each mortgage company, they have all said, now don't go and buy anything, cars, appliances, furniture etc, before closing. They will pull reports, and if they feel you don't have enough money, they will deny the mortgage. Better wait a little bit, than be without the house!

  • cardamon
    Original Author
    11 years ago

    Drewem, I haven't actually bought anything. I placed the order on Saturday and it would not be ordered til Monday when the girl ran it through. But I cancelled the order on Sunday within the 72 hour limit to cancel. I don't know where my brain was at the time. So now I'm just stressing over the credit inquiry thing. Not sure if that is even something to worry about because there was nothing purchased. Thanks.

  • ncrealestateguy
    11 years ago

    It is not so much the credit score that you need to worry about, but more so about your debt to income ratio. If you are on the fringe to start with, any other additional debt could put you over the allowed ratio.

  • brickeyee
    11 years ago

    "I'm asking for a specific citation to one federal reg or statute. I know I've had a charges processed for specialty items and custom orders from several reputable merchants that have required at least a deposit to be charged prior to processing an order.

    If you can't produce the citation to the "federal law" that says a merchant can't charge a cc until the goods are shipped, I'm just going to assume you made an uneducated statement and are trying to worm your way out by going on the offensive and changing the subject. If you do produce it I'll be woman enough to apologize too. 'nuff said."

    It was originally based in the postal regulations for mail order merchandise.

    Special order items are exempted since the order is considered placed at that moment, and there are some other outs if notice is given for 'special order' type items and even things that are presented as 're-payment' required.

    The CFR is thousands of pages long, and while I am forced to delve through it occasionally (I deal with ITAR and the FAR on a painfully regular basis) I get paid to spend that time.

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