Adding a Line of Credit for credit mix

[Raccoon290]

Currently my only open/closed accounts are student loans and credit cards. 

Would opening a LoC with my credit union positively effect my credit score in terms of credit mix? I know I may get a slight dip due to the inquiry and drop in AAoC. Or would the LoC be viewed as too similar to the revolving credit on my credit cards?

I've had no auto loans, personal loans, or mortgages on my record. My goal is to get the my score as high as possible for when I apply for a mortgage in another year or two. If a bump from having a healthy mix is more than a drop from a lower AAoC, I should look into that. 

[manyquestions]

A line of credit typically gets lumped in with revolving credit so it will probably have the same effect on your FICO score as if you applied for another credit card.  Once in a while they report as intallment loans but you already have that with your student loans.  I think you get most of the mix points if you have one installment loan (like your student loan)  and at least one credit card.

[SouthJamaica]

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@Raccoon290 wrote:

Currently my only open/closed accounts are student loans and credit cards. 

Would opening a LoC with my credit union positively effect my credit score in terms of credit mix? I know I may get a slight dip due to the inquiry and drop in AAoC. Or would the LoC be viewed as too similar to the revolving credit on my credit cards?

I've had no auto loans, personal loans, or mortgages on my record. My goal is to get the my score as high as possible for when I apply for a mortgage in another year or two. If a bump from having a healthy mix is more than a drop from a lower AAoC, I should look into that. 

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I don't think so.

[Anonymous]

I agree with the other two commenters, i.e. "No."

But your question is ultimately not a theoretical one about credit mix but a practical one which is: How can I get my score high enough so that I will qualify for the best mortgage rates?  We're happy to talk to you about that if you want.  If so, we'd need to know the following:

Do you know what your mortgage scores are (or opposed to the FICO 8 classic scores)?   What are they?  When were they pulled?  Do you know what your FICO 8 Classic scores are?

How many credit cards do you have now?  Do pay your cards in full every month?

What is your current credit card utilization CCU)?  (CCU involves the amounts that are reported to the bureaus and has nothing to do with whether you Pay In Full.  Many of us pay in full but still have substantial amounts reported.)  How easy would it be for you to pay all your cards to $0 except one, and then leave something small on the remaining card?  (E.g. $10?) 

Taking your student loans all together, what is the total amount they were for originally?  How much do you owe now?

How many inquiries do you have right now that are less than 366 days old?

Do you have any negative information on your reports?  (Lates, chargeoffs, public records, liens, judgments, etc.)

Do you know what your Average Age of Accounts is?  (Ignore what a service like Credit Karma says about your AAoA -- it calculates it based on a scoring model that is different from FICO.)  Do you know what your oldest account is?

[Raccoon290]

My score on CK is 770TU/776EQ

That's 10 credit cards with limits totalling 80k+ with a negligible utilizaiton (.01 to 1% depending on when it closes), 5 student loans and 10 closed student loans (paid off or transfer of servicers since Sallie Mae used to service them).

The only negatives are late payments (30 and 60) on one student loan that will fall off this October and one 30 day on a credit card that will fall off next January.

The weakest part is that my AAoC is 4.25 years. The oldest is a loan from 8.5 years ago. The newest are 2 cards I opened two years ago. So if a LoC won't change the mix, dropping my AAoC probably would be more harmful than I'd get from the LoC. 

As for inquiries, TU has one that is 2 years old and will probably fall off next month, and one from October 2014.  EQ has one from October 2015 from when I tried to get a quote to refinance my loans, though I didn't because the rate offered was awful.

edit: I'm also aware that my score is already approaching the point where I'd already be getting the lowest offered rate--if not already at that point. Just would rather get as low as possible once the time comes. 

[Anonymous]

Read up on the various threads about maximizing utilization...do this before applying for a mortgage if you haven't already. As far as your AAoA 4.25 isn't bad at all...be aware fico counts both open and closed acct CK only counts open. Honestly your profile don't look bad at all and you will probably get a nice bump as soon as the to baddies fall off. Don't worry to much about the mix, my middle score for my mortgage was 788 with no open installment loans and only 5 CC. You should be able to get a nice cushion for the best rates long before its time for that mortgage. Best luck!

[Anonymous]

Well, the bottom line is that you are in great shape, since you are confident that you will not be buying the house in the next 13 months.  By then a lot of great things will be happening:

(a)  Your only negatives (three lates) will be falling off.  This is extremely good news.

(b)  Your AAoA will have increased a full integer value.

(c)  Your inquiries will be falling off FICO's radar completely.  They may still be on your reports, but FICO stops counting them after Day 366. 

Note that in the case of (b) and (c), I am assuming that you open no more accounts.  This is in fact what you should do, because you have plenty of accounts -- you have far more cards than are needed to drive an ultra high score (one day) and you have many installment accounts (some open and some closed). 

As far as Credit Karma goes, I encourage you to continue to use it.  It's a great free tool and unrivaled (given its cost) for providing both a TU and an EQ report as often as once a week.

Are you basing your AAoA estimate on what Karma says?  Karma uses the Vantage scoring system and computes AAoA very differently from FICO.  I encourage you to learn how to compute AAoA using FICO's algorithm.  If you are sure you can promise yourself not to open any more accounts, then the  easiest way is to sign up for Credit Check Total and then cancel it after you get your three FICO scores (a few days later).  I think that will cost you $1.  After that, you AAoA will just steadily increase for every month of time that goes by.  (Assuming you don't have any accounts that will fall off your reports in the next couple years.)  Another nice thing about CCT is that it will give you a free Experian report, which you are not getting with Karma.  You should scrutinize your EX report and compare it with EQ and TU.

A few more pieces of advice:

If it looks like you will not be buying a house until summer of next year or later, then invest in a 3B monitoring report from myFICO after all your negatives are gone. 

Continue to always pay your cards in full.  That is really wise behavior and will help you, given that you are not buying for at least a solid year. 

When you are trying to see how high you can get your scores (just before pulling your FICOs, say) you should make sure that most of your credit cards are showing a $0 balance.  You want at least one true credit card (not a charge card) to show a positive balance.  But it is not important to constantly keep all your cards at $0.  You get no reward for doing thhat all the time, just before an important pull.

A final thought:

An AAoA of > 4 is actually not a problem at all.  Many people, including people in the 800 club, have an AAoA a little above 4.  An AAoA of < 2 would be a problem.