Understanding FICO® Scoring

[dr_stan3]

       About three months ago, I opened up my first line of credit in a Citibank student credit card. I've made all my payments on time and am seeking new lines of credit to build on my credit score. I understand that it's not recommended that someone who just opened their first CC go and apply for more within the first six months, but here's my thinking:

• I want to apply for a Gap card and Express store card because I shop/work there and want to get rewarded.
• I don't want to wait a few more months because holiday season is coming up, and I have many purchases planned at these stores.
• The increase in credit limit will help with my utilization, maybe not now, but eventually?
• I plan on opening more accounts in the distant future. So, why not build my average account age by starting up some accounts now? If I were to open up a new credit card in 4-5 years, it won't lower my average account age as much.
• I plan on making all payments on time/in full, and keeping the utilization ratio under 30%.

       The Credit Karma simulator predicted a 60 point decrease in credit score even though I'm opening up a new line of credit and haven't had any hard inquiries. My friend who has had a credit card for about three years saw an increase in credit score. This makes it seem like the reason I would take such a hit is because of my avg/oldest account age. So, some questions I have:

1. Why is the hit on my credit score so big for just an additional line of credit? Is it because I would be signing up for another credit card within 6 months?
2. Would this impact chances of getting the cards themselves? (Credit Karma currently predicts my score at 729)
3. If I were to take the credit score hit, how long would it be before I'd be able to recover my score again? Is the credit score hit a very temporary thing for people signing up for too many cards too soon? Or, is there going to be permanent/long-term damage for my decision to sign up for two more cards after only three months of my first?
4. Ultimately, what is the right decision here?

[llecs]

Welcome!

I agree that a 2nd CC would help but your FICO score would not increase that much. The scores offered by CreditKarma are not FICO scores. Ignore their scores.

If I had what you had, I'd wait until the other is 6 months old before applying for one more. Your odds will dramatically improve. If you only have this one CC, you don't have a FICO score yet and the odds of being denied are higher before it turns 6 months.

Don't apply for a card to carry balances on it. That can be dangerous. In other words, if you are looking to buy stuff at these stores, stick with cash if you don't have a store card by then. You'll find yourself wanting to apply for more store cards for the sake of ringing up balances on them. 

For best results per FICO, pay all cards to $0 except one and get the one under 9% util. 30% util will ding you quite a bit.

[Revelate]

Welcome to the forums!  I'd suggest two things in addition to illecs' most excellent advice:

1) You want to establish multiple tradelines as soon as possible.  2-3 revolving tradelines (credit cards for this discussion) is generally considered optimal both from what's been reported here, and also in my own personal experience as well.  3 is possibly marginally better than 2, but it's in no way required.  That said a swing of 3 months isn't going to hurt you at all in a few years anyway.

2) Inquiries are pretty minimal as far as penalties go; it is never recommended to continually apply for credit cards (or other loan types as well) but that doesn't sound like the case here.  While you won't have a FICO score for another few months, if you plan to shop at a particular store during Christmas and the rewards for the card are meaningful as compared to paying in cash, I'd probably take the shot anyway.  Alternatively I'd apply for something like BOFA's student rewards as that has their standard 1-2-3 rewards package on it, which is a pretty good every day card, and is designed for folks in your specific situation.

[dr_stan3]

I appreciate the replies! I suppose I should try to figure out my chances of getting accepted by either card.