Understanding FICO® Scoring

[TCarson]

Is the FICO Score hit you take each time when applying for a new credit card consistent, or does it take a big hit at first and smaller as you apply for more cards?

The reason I ask is after reading information (mostly from here at MyFICO) I realized that having only two credit cards for the past 12+ years was not enough.

I decided to apply for two more (Chase and Citi) and got both.
My "Real FICOs" were in the mid 700's before I applied, now the lower 700's

If I apply for a couple more cards now the way I read it is the initial hit will drop my scores a lot but it would be better to get it over with and get a few cards at the same time.

I know the added INQ's will make the score drop but I'm more interested in the "You recently opened a new credit account." effect of the New Accounts.

[Revike]

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TCarson wrote:

Is the FICO Score hit you take each time when applying for a new credit card consistent, or does it take a big hit at first and smaller as you apply for more cards? ... I know the added INQ's will make the score drop but I'm more interested in the "You recently opened a new credit account." effect of the New Accounts.

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As far as I know, there are three factors that might affect the score (in addition to the inquiries).

First, the age of your newest account will drop to 0 months. Obviously, this would occur when your first new card was reported, and wouldn't really change if your second card reported immediately after that.

Second, your count of "new" accounts would increase for each of the new cards. I don't know if the score drop is the same for both, or if the second new card has less effect. Some say the "new account" hit affects the score less after 6 months, other say it stays the same for 12 months.

Third, your average age of accounts would decrease as each card reported. Each new card would have some effect, the amount of each would depend on the age of your other accounts.

On the plus side, your utilization would improve as each new CL was added. The improvement in utilization might not be noticed unless it causes you to drop below a specific level, like 50% or 30% or 10%.

Message Edited by Revike on 07-14-2007 09:55 AM

[ilovepizza]

Newly opened accounts hit = 60-90 days.
Inquiries = 12 months on score, loosing some strength after 6 months.
After so many inquiries they seem to loose their sting completely as far as points but the inquiries them selves can haunt you for up to 2 years with lenders.
New accounts will still slightly haunt you as long as 12 months.
However to off set this.
UTL will be higher.
More history will raise score after 6 months.

After 12 months you are in the clear with the exception that your average age of accounts will drop. If you need to apply for a loan with in 12 months you might want to wait before exceeding the 4 cards until after the loan app.

I would agree 4 cards will help you more. Good move.
The idea of getting it out of the way is my theory too. But only when you have time to wait out the dip in score for up to 12 months or at least 6 months minimum. Thinking a head is best! A future 800 club member.

The real advantage of more cc's is average age when they get older. If you get a new card later while holding many old ones it has a smaller impact on average age. If you have 3-4 cards later and add one, it can drop your score because of shorter new average age. Not sure about scores for people with more cards. I have seen similar scores for people with 20 cards and people with just 4. However people with less than 3 cards in my opinion generally score lower in the revolving area.

Also keen in mind if you show balances on more than 4 cards at the same time your score can also drop, If you don't care about your score for the moment use them all if you want. More activity the better for history. Then limit to 4 or less balances when you need your score a bit higher.

[smallfry]

Carson I would wait about six months. I know there's a rush associated with getting new plastic but you'd be better served all around to hang tight for a bit.

[smallfry]

Carrying balances. Remember the car loans and the mortgages count towards the total. Don't exceed 4, ideal I think is 3 open balances reporting.

[TCarson]

Thanks for the answers. I think I'm on the right track for now with the two cards I added

I'm going to look for maybe one more.

With only two cards for the past 12+ years, carrying small (3 to 8%) balances and every few years using the one of the two cards "to the max" then paying it back down to 1-3%, the best I was able to get was 770's.

I know, 770 is very good but I want to be an 800+ member.

To me, there are very good reasons for this goal, like being able to take a hit on a new account without losing prime status.

At 770, one new account and I drop below the 740's. for a while.

One other question maybe someone here knows the answer to.

I applied and was approved for a Citi M/C.

Looking at their web site, I see that they also offer a Citi AmEx.

Is it possible to re-apply for the Citi AmEx also without having them pull another report?

Message Edited by TCarson on 07-15-2007 06:57 PM

[smallfry]

Doubt it but call.