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Valued Contributor
Dustink
Posts: 2,999
Registered: ‎10-02-2012
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Re: Why so many cards?

Most of the categories slip it in in some sense. Mix of accounts being the most obvious (not enough accounts to have a mix), payment history next (lack of or good history). I feel it mainly comes down to a lenders criteria. An applicant may have 1 credit card and a FICO of 720, then get declined for insufficient revolving history.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k          $8.5K          Closed          $19k         $6.5k           $24.2k        Closed          $5k         Closed       $8.5k        Closed      @2.49%
Established Contributor
distantarray
Posts: 2,112
Registered: ‎09-25-2011
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Re: Why so many cards?

[ Edited ]

1. Bargin chasers, a quite a few people try to get 5%+ discounts on as many categories as possible.

2. Drappers, people who get drunk and apply for multiple cards for no damn reason besides to fuel their addictions :smileytongue:

3. Bonus Chasers (churners) for instance if you have good credit you can apply for 5 credit cards, in 1 day which is a decent size churn, you can get almost 400,000 Hilton points even with their HEAVY devaluation can still get you upto 12 nights in a category 7 (1-10) Hilton hotel for free. Imagine you apply for hotel cards, and your fiance/wife goes applies for a few cards of her own for airline points = Free Vacation.

4. With Amex many try to strengthen their AAOA (average age of accounts) since they backdate their accounts (no one else does) For instance if you ONLY had 1 credit card for 10 years, and Fico gets VERY happy after 10-13 years average. without that it's almost impossible to hit 800 (as if it really matters after 720-760 is considered A+) but people like to try to hit it regardless. AAOA accounts for 15% of the Fico score.  

 

So for instance let's say you had ONLY 1 card for 10 years. If you openned up a 2nd card  now your AAOA would drop from 10 years to 5 years.

 

With Amex backdating if you had your own account openned 10 years ago, each card you open would have 10 year history. So let's say you had an Amex Green for 10 years. and you applied for a Crapital One. Now your AAOA is 5 years. Apply for another Amex and your AAOA is 6.66 years. Apply for another Amex and your AAOA 7.5 years. Amex is the only credit card company that can help INCREASE your score by getting more cards. I haven't had an Amex in over 10 years. Which already fell off my report. When I openned 2 Amex cards I got 24 years total (12+12) of extra credit history reporting.

 

5. Also getting over 6 credit cards will NOT hurt your Fico Score. Period. Proof? BobWang of creditboards has almost 70 Tradelines reporting on his credit file, and he has obtained the highest report Fico score for EQ04 which is 819. And no, no one has ever reported higher (after being credit obsessed for 2 years) even though it's stated 850 is possible, but it is not on the Fico04 scoring range which is the most commonly used score.

 

6. More cards = More limits = better debt / credit ratio balance (in theory anyways -_-:smileywink: assuming your responsible, and won't ever charge more than you can afford. But since credit card companies are retarded in their reporting system. For instance the balance is due on the 19th, even if you pay it on the 19th the full balance that you paid will still report to your credit bureau driving your scores down. So you should pay a few days in advance and NOT use it again. Some credit card companies also report mid month screwing your debt/credit ratio in the reporting. I run about 10-18k per month on my credit cards, both my parents have their own businesses, and at any given time I could have close to 20k reported. If I had 20k reported my credit scores would drop immensely, and what if I found a deal of a lifetime and couldn't get a mortgage in time? I would have to pay hundreds to thousands doing a rapid rescore =\

 

So in theory having over $100,000 in credit limits is a good buffer, since I should almost never hit over 20k charged.

 

 

 


total credit limits $108,400 Credit scores Ex 728 EQ 738 TU 758
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HiLine
Posts: 3,072
Registered: ‎10-19-2012
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Re: Why so many cards?


Dustink wrote:

Most of the categories slip it in in some sense. Mix of accounts being the most obvious (not enough accounts to have a mix), payment history next (lack of or good history). I feel it mainly comes down to a lenders criteria. An applicant may have 1 credit card and a FICO of 720, then get declined for insufficient revolving history.


I always thought you'd need a different type of credit such as a personal loan or auto loan to improve the mix of accounts, no? Does having more cards actually help payment history even if you never miss a payment? 

Established Contributor
distantarray
Posts: 2,112
Registered: ‎09-25-2011
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Re: Why so many cards?

 

HiLine wrote:

Dustink wrote:

Most of the categories slip it in in some sense. Mix of accounts being the most obvious (not enough accounts to have a mix), payment history next (lack of or good history). I feel it mainly comes down to a lenders criteria. An applicant may have 1 credit card and a FICO of 720, then get declined for insufficient revolving history.


I always thought you'd need a different type of credit such as a personal loan or auto loan to improve the mix of accounts, no? Does having more cards actually help payment history even if you never miss a payment? 


What looks better? 1 credit card for 10 years, and 120 months of history?  or 3 credit card for 3 years with 108 months of recent history?

 

Most banks would take the 3 credit cards with 3 years of history, why? cause it's more recent. Proof? In obtaining an FHA housing loan, they requested that I have atleast 2-3 credit cards for atleast 1 year.


total credit limits $108,400 Credit scores Ex 728 EQ 738 TU 758
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HiLine
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Registered: ‎10-19-2012
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Re: Why so many cards?

[ Edited ]

I am specifically asking about FICO scores. How lenders view your credit profile otherwise is irrelevant ...

Valued Contributor
Dustink
Posts: 2,999
Registered: ‎10-02-2012
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Re: Why so many cards?

[ Edited ]

HiLine wrote:

Dustink wrote:

Most of the categories slip it in in some sense. Mix of accounts being the most obvious (not enough accounts to have a mix), payment history next (lack of or good history). I feel it mainly comes down to a lenders criteria. An applicant may have 1 credit card and a FICO of 720, then get declined for insufficient revolving history.


I always thought you'd need a different type of credit such as a personal loan or auto loan to improve the mix of accounts, no? Does having more cards actually help payment history even if you never miss a payment? 


Sometimes auto loans and personal loans actually bring down a score, which makes sense from a risk perspective. You are tide down to a payment, thus less $$$ is available for other debts.

 

Generally, a few credit cards will yield a nice score. A mortgage in time will add positively to the mix. Which also from a risk perspective makes sense, it shows you are consistent and reliable enough to sustain a large payment on a high dollar asset.

 

Yes, more cards does help payment history. distant's 3-1 card example was perfect. The more cards you have, the more payments you are making. Look at it this way, you have 1 card for 10 years. That is 120 payments. If you instead had a 100 cards, that would be 12,000 payments. That would for sure bump a FICO for payment history.

 

Though, you can't just look at it from a category to category stand point. You have too look at a broader stand point. Simple put, more cards creates a more stable FICO. From the example above, it would be a lot harder to adversely effect that AAoA on the 100 card profile vs the 1 card profile. It is easier to understand this from a real-life perspective than a theoretical "what part of the fico does that effect". 

 

Most importantly, the FICO itself does not matter at all. It is what banks think of your overall profile. 

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k          $8.5K          Closed          $19k         $6.5k           $24.2k        Closed          $5k         Closed       $8.5k        Closed      @2.49%
Established Contributor
distantarray
Posts: 2,112
Registered: ‎09-25-2011
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Re: Why so many cards?


HiLine wrote:

I am specifically asking about FICO scores. How lenders view your credit profile otherwise is irrelevant ...


Remember Fico scores are irrelevant if the banks don't like your credit profile.

 

 

Also from a Risk point of view what would you prefer? A mix of credit is healthy, but only if you have a long history of it, and especially if you've built some equity.

 

For instance if your a bank say you have 2 customers.

 

a) Customer has 3 credit cards, recent mortgage of 1st year of a 30 year mortgage, and a 2 years into a car loan.

 

b) Customer has 3 credit cards, and no other bills.

 

Majority of banks would favor customer B because he has less bills in his name given that the income is the same. From a underwritter's point of view less committed debt = lower risk.

 

Although that changes when Customer A has built up more equity, especially if the house is over half paid off.


total credit limits $108,400 Credit scores Ex 728 EQ 738 TU 758
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HiLine
Posts: 3,072
Registered: ‎10-19-2012
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Re: Why so many cards?


Dustink wrote:

HiLine wrote:

Dustink wrote:

Most of the categories slip it in in some sense. Mix of accounts being the most obvious (not enough accounts to have a mix), payment history next (lack of or good history). I feel it mainly comes down to a lenders criteria. An applicant may have 1 credit card and a FICO of 720, then get declined for insufficient revolving history.


I always thought you'd need a different type of credit such as a personal loan or auto loan to improve the mix of accounts, no? Does having more cards actually help payment history even if you never miss a payment? 


Sometimes auto loans and personal loans actually bring down a score, which makes sense from a risk perspective. You are tide down to a payment, thus less $$$ is available for other debts.

 

Generally, a few credit cards will yield a nice score. A mortgage in time will add positively to the mix. Which also from a risk perspective makes sense, it shows you are consistent and reliable enough to sustain a large payment on a high dollar asset.

 

Yes, more cards does help payment history. distant's 3-1 card example was perfect. The more cards you have, the more payments you are making. Look at it this way, you have 1 card for 10 years. That is 120 payments. If you instead had a 100 cards, that would be 12,000 payments. That would for sure bump a FICO for payment history.


But as far as payment history goes, FICO only cares about AAoA, timeliness of payments, and the length of credit history, correct? Having more credit cards doesn't help any of these factors. I must be missing something...

Valued Contributor
Dustink
Posts: 2,999
Registered: ‎10-02-2012
0

Re: Why so many cards?


HiLine wrote:

Dustink wrote:

HiLine wrote:

Dustink wrote:

Most of the categories slip it in in some sense. Mix of accounts being the most obvious (not enough accounts to have a mix), payment history next (lack of or good history). I feel it mainly comes down to a lenders criteria. An applicant may have 1 credit card and a FICO of 720, then get declined for insufficient revolving history.


I always thought you'd need a different type of credit such as a personal loan or auto loan to improve the mix of accounts, no? Does having more cards actually help payment history even if you never miss a payment? 


Sometimes auto loans and personal loans actually bring down a score, which makes sense from a risk perspective. You are tide down to a payment, thus less $$$ is available for other debts.

 

Generally, a few credit cards will yield a nice score. A mortgage in time will add positively to the mix. Which also from a risk perspective makes sense, it shows you are consistent and reliable enough to sustain a large payment on a high dollar asset.

 

Yes, more cards does help payment history. distant's 3-1 card example was perfect. The more cards you have, the more payments you are making. Look at it this way, you have 1 card for 10 years. That is 120 payments. If you instead had a 100 cards, that would be 12,000 payments. That would for sure bump a FICO for payment history.


But as far as payment history goes, FICO only cares about AAoA, timeliness of payments, and the length of credit history, correct? Having more credit cards doesn't help any of these factors. I must be missing something...


Why does the FICO matter?

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k          $8.5K          Closed          $19k         $6.5k           $24.2k        Closed          $5k         Closed       $8.5k        Closed      @2.49%
Valued Contributor
Dustink
Posts: 2,999
Registered: ‎10-02-2012
0

Re: Why so many cards?


distantarray wrote:

HiLine wrote:

I am specifically asking about FICO scores. How lenders view your credit profile otherwise is irrelevant ...


Remember Fico scores are irrelevant if the banks don't like your credit profile.

 

 

Also from a Risk point of view what would you prefer? A mix of credit is healthy, but only if you have a long history of it, and especially if you've built some equity.

 

For instance if your a bank say you have 2 customers.

 

a) Customer has 3 credit cards, recent mortgage of 1st year of a 30 year mortgage, and a 2 years into a car loan.

 

b) Customer has 3 credit cards, and no other bills.

 

Majority of banks would favor customer B because he has less bills in his name given that the income is the same. From a underwritter's point of view less committed debt = lower risk.

 

Although that changes when Customer A has built up more equity, especially if the house is over half paid off.


Exactly

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k          $8.5K          Closed          $19k         $6.5k           $24.2k        Closed          $5k         Closed       $8.5k        Closed      @2.49%

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