Rebuilding Your Credit

[OhWejo]

Hello All,

     First of all, thank you for your time in reading my question.  I am looking to lease/buy a vehicle in Jan 2011.  In the meantime, I have paid off several of my negative debts and according to my TransUnion report there is an inquiry and 2 other very old negative items that will be falling off.  I know this will improve my FICO score, however, I was wondering if it would be wise to take out a secured/unsecured line of credit in the meantime, while waiting to get my car.  I know that initially this may hurt my score, but is it wise to think that maybe a few months of on-time payments and and increase in my debt to credit ratio may help?  Any suggestions would be greatly appreciated.  Thank you!

Wesley

[RobertEG]

Is it an installment loan, or a revolving line of credit?

On the negative side, it will of course cost you a new inquiry, and reduce your average age of accounts.

On the postive side, IF it reported as revolving credit, it may improve your revolving CL, and thus reduce your overall % util.

[OhWejo]

It is a revolving line of credit with a local credit union.

[RobertEG]

In very rough terms, I would expect a hit of around 5 pts from the new account and reduction in AAoA.

In my opinion, it would take an increase of close to 20% in your overall CL to offset this in the short term.

So, the factor for me, would be the amount of the additional CL this new LOC will report.

[OhWejo]

The line would be <1000

[RobertEG]

If your current, total CL is now at least $5K, my vote would be not to open it.

[jodi27]

I recently opened a CC  with my credit union; it has a $1500 credit limit.  My only other CC I have has a $300 limit.  I have 0% utilization; will opening this new account improve my score since my CL was so low before?