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New Member
JFKONE
Posts: 4
Registered: ‎01-03-2011
0

New Credit Accounts

New to rebuilding - been at it for a couple of years.  Rebuilding with a car loan and small credit card...and paying off negative bureau items and/or having them deleted/expering.  Started in the low 500s, now in the lower to mid 600s - getting there.  Question is:  I would like to get out from under the credit card - high APR, high monthly/yearly fees.  Have had it for 27 months.  Using the FICO Simulator, it tells me that getting a new card at $1000 and trasnferring the balance ($300 on a $660 CL) will lower my score???  Will it?  I also have my bank wanting me to get an overdraft line of credit for my checking account.  Will getting a new credit card and/or ODL lower my score?  Will be keeping the balances low - maybe 10% or less on the card (currently paying down the card I do have - realize that the usage is too high), more that likely zero on the ODL (haven't had an overdraft in years). 

 

Have read a lot on here about the number of cards/lines to have - 2-3?  Balances of 10-20% or less?

 

All advice appreciated!

Valued Contributor
JM-AM
Posts: 3,302
Registered: ‎06-09-2010
0

Re: New Credit Accounts

 


JFKONE wrote:

New to rebuilding - been at it for a couple of years.  Rebuilding with a car loan and small credit card...and paying off negative bureau items and/or having them deleted/expering.  Started in the low 500s, now in the lower to mid 600s - getting there.  Question is:  I would like to get out from under the credit card - high APR, high monthly/yearly fees.  Have had it for 27 months.  Using the FICO Simulator, it tells me that getting a new card at $1000 and trasnferring the balance ($300 on a $660 CL) will lower my score???  Will it?  I also have my bank wanting me to get an overdraft line of credit for my checking account.  Will getting a new credit card and/or ODL lower my score?  Will be keeping the balances low - maybe 10% or less on the card (currently paying down the card I do have - realize that the usage is too high), more that likely zero on the ODL (haven't had an overdraft in years). 

 

Have read a lot on here about the number of cards/lines to have - 2-3?  Balances of 10-20% or less?

 

All advice appreciated!


 

Is that all the open current accounts you have is 1 installment car loan and 1 small CC?

 

What is the credit limit on that small credit card and what is the balance owed?

 

What are the left over negatives still reporting?

Good Luck
May all your dreams and wishes become a reality!
Mega Contributor
RobertEG
Posts: 18,463
Registered: ‎03-19-2007
0

Re: New Credit Accounts

Welcome to the site!

Your question has a LOT of things to consider.  Some things will help your score now, and some will hurt it.  However, some things that you do now, while maybe hurting your current score a bit, might be advisable for longer-term score improvements.

Let me give a few observations

 

First, your high interest, low CL, CC with annual fees.  Both the interest on this card and its % util impact on your score is readily solved by just getting it down to paid in full each month, and keep it open.  Thus, no interest and 0% util.   But as long as the account remains open, you will still absorb the annual fee.  You can avoid future annual fees by paying it off and closing it.  The risk in doing this is that some creditors, once an account is paid and closed by you, may additionally choose to delete the account.  That is totally up to them.  If they dont delete, you retain its age of account of 27 months in future FICO evaluation and scorng of your oldest account, and your average age of accounts (AAoA) for up to around 10 years.  You cant predict what they might do.

 

As for opening a new line of credit to dispose of the debt of your current CC, and thus improve your scoring of that card, you offer two options.  Getting a line of credit (LOC) with your bank, or getting a new CC.  It is very hard to offer advice on which might be more preferable, so I will just throw out some suggestions for your consideration.

As for FICO scoring impact, does your bank report to any of the CRA's?  If they dont do credit reporting, and dont make an inquiry  for your CR in their approval of your LOC, you wont take a small hit for a new inquiry.  But you also wont expand your credit file by the addition of a new revolving account.  If they do report, you will get the advantage of an increased overall CL, which will lower your % util, but will concurently also add a new inq. and lower your AAoA. 

Applying for a new CC will almost assuredly result in a new inq to your CR.  If they approve, which does not seem as firm as your current offer from your bank, then you must also consider what kind of CL they will put on the new card.  That will help your overall % util, but will concurrently also lower your AAoA.

 

If longer term credit score improvements are your goal, then you definately need more than one revolving line of credit, reported to the CRAs, to build you from a thin to a thick credit file.  If the short term hits of new inquiries and reduction of your AAoA can be lived with for a year or two, then maybe the new CC might be the best.  But secural of a new CC is not assured.  A current FICO in the mid-600s is reasonable expection of a reasonable CL new card.

 

 

New Member
JFKONE
Posts: 4
Registered: ‎01-03-2011
0

Re: New Credit Accounts

Hey guys – thanks so much for your feedback!  It is greatly appreciated.  I will answer your questions, first some history:  Lost my job due to downsizing in Sept 2005 and then was unemployed for 18 months.  In that span, was evicted from my apartment, car repossessed, pretty much lost everything (but did not file bankruptcy).  Went back to work Mar 2007 and since then, have been focused on rebuilding.  And that is my focus – long term health. All of the negatives I have currently, including the judgment filed for the eviction and the repossession, will be off my report by Oct 2013.  My professional background is, ironically, in financial services, and in order to land another big job like I lost in 2005, I will need a clean report.  Once that’s secured, sometime maybe in 2015 I would like to buy a house.

 

I use TrueCredit through TransUnion to monitor everything on a monthly basis, and pull my reports and FICO scores the first of each year, in fact, just did all this on Sunday.  My current scores are:  TU 633  EX 648  EQ 647  FICO TU 611  FICO EQ 624

 

So, given all that, here are answers to your questions:

 

My open accounts right now are my car loan (opened Apr 2008, matures Oct 2013, all payments on time, $8800 balance), a credit card (opened Oct 2008, all payments on time, earn CL raises every 6 months of $75, CL $600, balance is $300) and my student loans (consolidated and current), balance $26k.

 

My other positives are two closed and paid credit cards (AMEX and a Chase) and a paid off car loan.  The cards will come off in 2014 and the car loan will come off this October. 

 

My negatives are the judgment (eviction from apartment) and was paid off in Sep 2010 due to come off Mar 2013, repossession of my SUV ($775 left, will be paid off in March), will come off Oct 2012.  Two recently paid off medical bills, will come of Jan 2012, recently paid off utility bills (gas, cable, phone), all will come off by Jun 2013.  Two checking account balances that I’m currently paying off, total left of $400, will come off June 2012, and one other banking account balance paid off in Oct 2009 that will come off Dec 2012.  Lastly, 2 BMG and 1 Columbia House accounts that just hit my report last month – in contacting the collection agency, they have assured me that once the balances are paid ($200 for each BMG, $100 for CH) they will be removed from the bureau.

 

That’s what’s out there now, and what I’ve been able to do so far.  I have time to accomplish my goals, and my main concern is making the right decisions to rebuild things and set myself up for 2014 / 2015.  A long way off, understandably, but from where I was and what I’ve been through, I do not want to go back!  From what you have said here Robert, I understand that with opening new accounts now, it may lower the score initially, but I will be better off in the long run.  The overdraft line of credit will generate an inquiry, and will most likely have a CL of $500 to $1000.  I’m really in no hurry to get it or another credit card, but reading everything out here, 2-3 cards would be a good idea.  I’m thinking of another VISA, and/or maybe a dept store card or gas card.  I will have my current credit card balance paid off by mid-year.

Lastly, credit inquiries.  Right now I have 6 – 4 of which will be gone by June 2011.  Of the two remaining (which will be gone by Jun 2012), one is an employment verification and the other is for Dish Network!  So I think that once things continue to improve and I only have 2 inquires out there, that I might try for the new card(s) and credit line next year.

New Member
JFKONE
Posts: 4
Registered: ‎01-03-2011
0

Re: New Credit Accounts

Thanks - I've posted my reply to your questions along with my reply to Robert below his post.


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