Opening a new Credit Card....

[Anonymous]

Alright so a few days ago I talked to my bank and tried to obtain a morgage loan with them for around $40,000. I'm in the market to purchase a home around $80,000 ($40,00 in cash + the morgage). I gave the bank the approval to check my credit report even though I know it's not a good idea to get it checked. The results came back that I have a score of 779-806 credit score from them 3 credit reporting agents. The bank considers anything above 720 to be excellent credit however they require 3 active elements on your credit report to be in good standing plus be open for over a year. At the end of the day the $40,000 morgage pre-qualification was denied due to not having enough open credit-worthy elements and I didn't have enough income per month to take out such a loan legally by law. The morgage rep did say however that even though I didn't have 3 active credit elements they more than likely would have done the loan if I had more income per month.

Sorry for the story above but it may help answer my question without getting questions about it. So the question I have is would obtaining a 2nd creditcard hurt my credit score or affect it in the long-term? My current accounts:

1. One credit card with a balance of $0, credit limit $5,000

2. Bank checking account and savings account with the Debt card active but never used both accounts in the positive.

3. PayPal account with a balance of $0

I'm pretty positive 2 and 3 don't affect the score whatsoever (unless it was in the minus and reported to a collections angency). In 2 years in my best knowledge my report was aquired once by my bank (more than likely shows up in the report). no payments ever late, etc, etc.

So what I want to know is having a credit card with a $5,000 credit limit and a second card with lets say a $1,000-$5,000 credit limit both with balances of $0 (but used monthy to charge no more than $50 and paid in full each billing month) hurt my score long-term. I know applying for the card and having a new element on the account will probably make my scores goto 729-756 but after a year or so that will disappear. Any advise?

[llecs]

Welcome to the forums!

I'd look for another lender personally. You are in great shape and if the credit accounts (or lack of) is the only thing holding you back then I bet you can get approval elsewhere. Some lenders do have a requirement to show history and many are fearful of people gaming the system by purchasing TLs or piggybacking. But some look beyond the number of TLs and will consider alternative means like your rental history, your utility payment history, etc.

If you added another CC or two, you will be in better shape. Any ding by adding more credit will depend on the age of the account showing right now. Older it is (sounds like it), the more of a ding you can face as your AAoA takes a tumble due to the new accounts. You'll still be in the mid-700s I bet.

If you add another CC, the limit won't matter per FICO. You can get two secured CCs at $300 each and you'll be no better off than if you added two $10k CC. FICO ignores the CL. It is how you use it that counts. Under a manual review, I wouldn't see any reason why your lender would care if you had high or low limits. I say get a secured because that will limit your inquiry exposure. You can always try unsecured, but if you find you are getting denied due to a lack of history, you need to stop apping.

You are right, #'s 2 and 3 don't impact FICO.

[Anonymous]

Welcome!

Llecs makes some great points.

I'd add that either a secured or a non-secured card will affect your AAofA.  Because of your high FICO scores, I think you'd qualify for an unsecured card that you could carry for the long term.  You'll just need to be savvy about apping for cards that don't require more than one account in your history (some require a few accounts open for a set amount of time).

Your estimate of a 50 point hit for opening a new account is much much more than you're likely to see, IMO.   When you're in the building phase (or the rebuilding phase) you're not hit as hard for inquiries and new accounts as you will be once you have a "fatter" CR.  DH and I both saw very minor point changes when opening our 2nd active CC.  I think he went up a few points, and I think I lost a few (less than 5 in both instances).  YMMV, of course, just thought that data point might be helpful to you. 

What is your current AAofA?  What will it be if you add a new account?

And, if you're okay with sharing it, who is your current cc with?

Also, if you pull a report and score from this site, you'll also get a score simulator which will help you know how certain actions (i.e. opening a new account) will likely affect your personal FICO score.  It gives a broad range, but it still can be very helpful.

[Anonymous]

Currently my Creditcard is Capital One. When I was 18 they were the first ones to send me a pre-qualifying application in the mail so being 18 I jumped onto it. Only had a credit line of $500.. its been 5 years now and I'm still with them. The card I have however I opened in June 2010 and close the first card. Some might think this to be bad but after looking at my report they transfered the old cards stats to the new card only difference is the account age date (2006 would be better to have than the 2010 date).

My goal here isn't to rapidly boost all my scores above 800. I would like to maintain the 779-806 score I have (and possibly improve it a bit but not go crazy with it). I remember reading somewhere that you can have 2 credit cards with balances no more than 20% of the credit line and it not affect your credit score greatly. The question I'm wanting to know is having 2 creditcards with very small balances on them ($0-$100) and one only a year old the other just opened if that would drop the score badly. And in the long-term would it matter if I pretty much have 2 credit cards almost in idle status? The cards are solely a means to boost credit as I pay cash alot.

And if it matters I wanted to apply for the $200 Bonus chase credit card.

[Booner72]

My best guess is nothing you can do will affect your score "badly" - the only way you'd take a nosedive is if something went late or to collections etc.  Normal use of credit that you need, including inquiry and affect on AAoA, will not hurt you in such a way that you will not recover quickly.

[haulingthescoreup]

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@Anonymous wrote:

Currently my Creditcard is Capital One. When I was 18 they were the first ones to send me a pre-qualifying application in the mail so being 18 I jumped onto it. Only had a credit line of $500.. its been 5 years now and I'm still with them. The card I have however I opened in June 2010 and close the first card. Some might think this to be bad but after looking at my report they transfered the old cards stats to the new card only difference is the account age date (2006 would be better to have than the 2010 date).

My goal here isn't to rapidly boost all my scores above 800. I would like to maintain the 779-806 score I have (and possibly improve it a bit but not go crazy with it). I remember reading somewhere that you can have 2 credit cards with balances no more than 20% of the credit line and it not affect your credit score greatly. The question I'm wanting to know is having 2 creditcards with very small balances on them ($0-$100) and one only a year old the other just opened if that would drop the score badly. And in the long-term would it matter if I pretty much have 2 credit cards almost in idle status? The cards are solely a means to boost credit as I pay cash alot.

And if it matters I wanted to apply for the $200 Bonus chase credit card.

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While someone who already had 5 or 6 or 10 or 20 cards might see an initial hit, I don't know that you'll see much of one at all. The FICO scoring formulas "like" to see three open revolving accounts, i.e. cc's.

Certainly not a 50-point dive.

In the post-financial-meltdown (OK, post-first-financial-meltdown) climate, many lenders are going to be equally hesitant about issuing a card to someone with so little active revolving history. You might want to check out a local credit union and/or local bank, possibly wherever you maintain your checking and savings.

When you're ready to go back for a mortgage again, time it so that one of your cards reports $10 or $20, and the other two report $0. In almost all cases, the reported figure is what shows as due on your monthly statements, so just pay them off several days before the next statement is due.

You should be fine. Unfortunately, we're in a world where lenders want to see someone else stick their necks out first to extend credit, even to someone in as great shape as you are.