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flingus
Posts: 4
Registered: ‎07-11-2011
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Getting revolving credit to improve score

Getting a lot of different stories on this one, need help..

 

Long story short, I talked with a credit union, and a agency that goes over your credit report and gives suggestions on how to improve your credit. I got some conflicting information. The agency says I need "revolving credit" like a credit card to improve my score, I currently have no credit cards, just a mortgage, car loan, and small personal loan. The credit union says, revolving credit will be a negative impact on my score, and I shouldn't get one.. Then suggested I get a $2,000 limit card. ????

 

My goal here is to get my credit score up, so I can refi my house in about a year.. I was thinking of getting a $500 limit card, and paying off the balance monthly. Maybe using it for gas or going out to eat. Does anyone think this will help my score? Or should I just save myself the hassle and just keep paying my mortgage, carloan, and personal loan on time and save myself a hard inquiry?

 

Thanks, any advice would be appreciated.

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haulingthescoreup
Posts: 28,115
Registered: ‎04-01-2007
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Re: Getting revolving credit to improve score

[ Edited ]

Hi, welcome to the forums!

 

Yes, absolutely, it's really pretty hard to have really good FICO scores (you have three) without open revolving credit. That's because revolving credit is riskier to the lender (= easier for the consumer to mishandle), so you get more points for successfully managing revolving credit.

 

While your score will probably initially drop when you first get a CC, due to the new account ding, the inquiry ding, and possibly a lower AAoA (average age of accoumts) ding, your scores should recover relatively quickly due to the help from the presence of revolving credit.

 

I love credit unions and local banks, but on some scoring systems they don't count for as much as do large banks. (This is probably changing, but ya never know.) We had a member here with great credit and only two cards from USAA (a federal savings bank that resembles a CU), and she had a negative score factor for no bank cards.

 

So I'd try for one or possibly two CC's from one of the more well-known major banks such as American Express, Bank of America, Citi, Chase, etc. You'll probably get a ton of advice on which particular ones to try for. Or you can get one bank card and one from your CU, which should be enough.

 

Do you know any of your three FICO scores? Unfortunately, it's nearly impossible to buy your FICO score from a credit bureau these days, because they'd much rather sell you their meaningless FAKO scores, which make them money but don't do a whole lot else.

 

Do you have any negatives on your credit reports, other than no open revolving credit? That will affect your chances with different cards, so if you're willing to share, other people can tailor their advice a bit.

 

Anyway, yes, you probably need revolving credit, yes, there will be a temporary dip which will more than recover, and yes, you don't want to wait to do this until right before you refi. I'd shoot for two now, and then nothing else until refi time. Read around here for tips on how to use your cards to optimize your scores.

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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flingus
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Re: Getting revolving credit to improve score

Thanks for the reply.. I have some negative information on my report which will fall off May of 2012. 

 

What your saying makes sense, a credit card is a slipperly slope. Easy to get yourself in trouble but, if handled properly can improve your score because, its so easy to mess up.

I like the idea of my credit union giving me the card because, I was able to give them a copy of my fico score and report and they said there was no problem giving me a card. I worry about applying online and getting denied. Not quite ready to share my score for the world to see (no offense intended!) but, I can tell you if you were to look at it from a Excellent, Good, Fair, Poor standpoint, I am under the Fair category, very close to Good. Debt to income ratio is around 23%. Which should also improve by the end of year, after this small personal loan is paid.

 

I did notice there are websites that offer credit cards according to credit score so, I may look into that to try getting a "big bank" style of card.

 

Did I understand this correctly? There are seperate fico scores for each credit report agency? My understanding was, there was the mother of them all, the FICO, then three scores each reporting agency used which were their own "brand" of FICO. Which is it???

 

Thanks again!

 

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haulingthescoreup
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Re: Getting revolving credit to improve score

[ Edited ]

Each credit bureau commissions its own FICO score formula, and each one seems to be a bit different from the other two.

 

Additionally, most of us have slight variances on our credit reports --an account that only reports on Experian, another that's clean on TransUnion but has some old lates on the other two, 3 inquiries on Equifax (EQ), 4 on Experian (EX), 1 on TransUnion (TU), and so forth.

 

So the combo of different score formulas and different credit reports means that more than likely, you wind up with three different FICO scores.

 

To make it crazier, TU is dragging its feet in providing the newer version of its FICO score, called (informally) TU04. All we can get here is TU98, and for some people the two scores are quite different. The EQ FICO here is the Beacon 5.0, which most of the industry uses, including your CU apparently. Good job showing them the report and score and getting an informal thumbs up! I love credit unions for that sort of thing. Meanwhile, Experian took all its marbles several years ago and refuses to sell consumers our own EX FICO score, preferring to flog its FAKO's instead. For a while, a number of us were able to join PSECU, a Pennsylvania credit union, but recently the member organizations refused new memberships from out-of-staters, so for most of us, our EX FICO's are mysteries.

 

It's perfectly fine to start with the CU card. Somewhere before you're six months out from your refi, you might try for a second card from a bank, so that you have two lines working for you, but don't apply any closer to refi time than that. As a rule, you shouldn't get new credit within a year of applying for a mortgage, but if you have to improve your credit profile, that's different. Nevertheless, don't go bat-wild and go on an app frenzy, loading up with a bunch of junky cards. Two are fine; three can be better when you have open installment loans, but it's not the end of the world.

 

Sounds like you have some good help from your CU. They're generally pretty wonderful folks.

 

 

eta: mortgage apps pull all three FICO scores, and they go with the middle score, which is why all that above is relevant. Refi's might not, but they probably will. The myFICO people are apparently working on getting TU04 here. If they succeed, you'll know two of your FICO's, and as long as the lower one of those two is acceptable, your middle score of the three will be at least that high. In other words, if your unknown EX score is lower than the lower known score, it won't matter, because they'll go with the middle score. If your unknown EX score is higher than your lower known score, then your middle score will be that number or the higher one from here, so you're in even better shape. I hope that makes sense. It always makes me a bit cross-eyed to type it out. :smileytongue:

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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flingus
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Re: Getting revolving credit to improve score

Ok, makes sense. Thanks for the info !

 

I may just go ahead and get the card from my credit union, then possibly get another from a big bank. Chase has an offer out now where they are giving you $120 to start a new checking account with them. Only requirement is you have to have a $100 balance for 6 months with them. (They give you the $120 right away but, if your balance goes under $100 they will withdraw it from your acct) I figure I'll start a new acct with them and get some cash out of it, then maybe see if I can get a credit card from them in a little while.

 

Only one last question.. There is one thing I don't quite understand. I thought, there were basicly a total of 4 credit scores. (Basicly) One from each credit report (which they could call whatever they want, and calculate any way they want), and then the FICO score, which I thought took into account all three credit agencies. From what you're saying though, it seems I'm wrong and really, there are 3 FICO scores, one from each agency. Is this correct?

 

Thanks again!

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Wolf3
Posts: 3,198
Registered: ‎01-24-2010
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Re: Getting revolving credit to improve score


flingus wrote:

Ok, makes sense. Thanks for the info !

 

I may just go ahead and get the card from my credit union, then possibly get another from a big bank. Chase has an offer out now where they are giving you $120 to start a new checking account with them. Only requirement is you have to have a $100 balance for 6 months with them. (They give you the $120 right away but, if your balance goes under $100 they will withdraw it from your acct) I figure I'll start a new acct with them and get some cash out of it, then maybe see if I can get a credit card from them in a little while.

 

Only one last question.. There is one thing I don't quite understand. I thought, there were basicly a total of 4 credit scores. (Basicly) One from each credit report (which they could call whatever they want, and calculate any way they want), and then the FICO score, which I thought took into account all three credit agencies. From what you're saying though, it seems I'm wrong and really, there are 3 FICO scores, one from each agency. Is this correct?

 

Thanks again!


flingus wrote:

Ok, makes sense. Thanks for the info !

 

I may just go ahead and get the card from my credit union, then possibly get another from a big bank. Chase has an offer out now where they are giving you $120 to start a new checking account with them. Only requirement is you have to have a $100 balance for 6 months with them. (They give you the $120 right away but, if your balance goes under $100 they will withdraw it from your acct) I figure I'll start a new acct with them and get some cash out of it, then maybe see if I can get a credit card from them in a little while.

 

Only one last question.. There is one thing I don't quite understand. I thought, there were basicly a total of 4 credit scores. (Basicly) One from each credit report (which they could call whatever they want, and calculate any way they want), and then the FICO score, which I thought took into account all three credit agencies. From what you're saying though, it seems I'm wrong and really, there are 3 FICO scores, one from each agency. Is this correct?

 

Thanks again!


There are 3 FICO scores, one each from the Credit Bureau agencies.   There are lots of other credit scores from agencies and others.


 

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castlefox
Posts: 227
Registered: ‎12-09-2010
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Re: Getting revolving credit to improve score

My understand is that there is a FICO score for each credit agency.   So a total  of 3 not 4

MyFICO score- Equifax - 12.03.11 - 780 Experian 12.03.11 - 763
(FAKO Scores) EXP PLUS Score Dec 2011. 748
Advanced Risk Score 2.0 (NextGen) 793 Dec 2010
Vantage Score (2011) MAR = 771 Jun = 771 Sept= 788 Dec= 773
2012 MAR = 782 JUN=783 Dec = 789
2013 Mar-796 Jun-799 Dec- 797
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flingus
Posts: 4
Registered: ‎07-11-2011
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Re: Getting revolving credit to improve score

[ Edited ]

This has been interesting! Ok, I have a good understanding now.. I have heard people, and I've said this myself, "My credit score is ###".

When in reality, if you are to have a total picture, you would need all 3, FICO scores. One from each agency.

This is being a bit anal but, I want to be accurate, and have a full understanding of what my credit health is.

I guess if I was applying for a loan or something, and that company only looked at Transunion, I would just run a transunion fico though.

 

Just found this on this site as well.. This is worded exactly from myfico.com :

 

FICO scores are the credit scores most lenders use to determine your credit risk. You have multiple FICO scores, one from each credit bureau. Each FICO score is based on the information that each credit bureau keeps on file about you.

 

Hope this thread helps others, I learned a ton.

 

Thanks!

 

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haulingthescoreup
Posts: 28,115
Registered: ‎04-01-2007
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Re: Getting revolving credit to improve score

[ Edited ]

There are lots of credit scores. And then there are your FICO scores.

 

There's a brisk industry in selling "credit scores" to consumers who (understandably) don't realize that the scores are worthless, in that they're used by very few, if any, lenders. These are the ones that we call "FAKO's", pun intended.

 

Many people have tried to track their FAKO's in hopes that they might sorta mirror their FICO's, but since they're based on different score formulas, they can go up when your FICO's go down, and vice versa.

 

I love credit monitoring services for the ability to track changes on your credit reports. But many of them come with FAKO's, and I had to learn to ignore the FAKO scores.

 

In addition, following the advice that comes along with FAKO scores can actually hurt your FICO's. :smileysurprised: So it's important to know how to separate out all this junk.

 

And the only reason that this is important is because it's much more likely that a lender is looking at your FICO scores. If someone doesn't anticipate needing credit (ever, ever again), then all this is meaningless. But at some point, most of us are going to have to deal with our numbers, for a mortgage, a car loan, whatever, so I prefer to know the score that my lender will be looking at. Which is why I'm not-so-patiently waiting for TU04 to come along.  :smileytongue:

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007

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