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A few friends of mine and I are debating how number of accounts will affect your FICO score. I would think that the more positive accounts you have every month reporting to your credit report will help strengthen your report and in return help your FICO score. I have 20 credit cards, 2 auto loans and 1 student loan. All of these accounts have been opened since March 2015. My score was in the high 400's and now low 600's. I have a crap load of collections and inquiries as you can see in my signature. I am assusing that my theory is correct. What does everyone else think? I wonder if I obtained lets say 10 more cards, it would raise more monthly. I understand time along with other factors help.......
@CostantinoA wrote:A few friends of mine and I are debating how number of accounts will affect your FICO score. I would think that the more positive accounts you have every month reporting to your credit report will help strengthen your report and in return help your FICO score. I have 20 credit cards, 2 auto loans and 1 student loan. All of these accounts have been opened since March 2015. My score was in the high 400's and now low 600's. I have a crap load of collections and inquiries as you can see in my signature. I am assusing that my theory is correct. What does everyone else think? I wonder if I obtained lets say 10 more cards, it would raise more monthly. I understand time along with other factors help.......
Number of accounts don't have an impact on scores
What matters is length of history, Payment, type of accounts (mix) and amount owed
So weather you have 40 accounts or two Fico only sees the above to determine scores
Ok who wins the debate? Lol
Um, sorry to burst your bubble, but no, number of accounts alone, especially so many new accounts, is not the magic elixir for your FICO score.
What is much more likely and much more beneficial is to add AU accounts that are well aged and in good standing.
Oh, wait, you already added 5 AU accounts that are likely well aged and in good standing. There's your positive effect OP.
@CostantinoA wrote:A few friends of mine and I are debating how number of accounts will affect your FICO score. I would think that the more positive accounts you have every month reporting to your credit report will help strengthen your report and in return help your FICO score. I have 20 credit cards, 2 auto loans and 1 student loan. All of these accounts have been opened since March 2015. My score was in the high 400's and now low 600's. I have a crap load of collections and inquiries as you can see in my signature. I am assusing that my theory is correct. What does everyone else think? I wonder if I obtained lets say 10 more cards, it would raise more monthly. I understand time along with other factors help.......
In your case you're scores are being suppressed by having a lot of inquiries and new accounts, so your best bet would be to stop opening new accounts for a year.
It's not really 'debatable'.
It isn't as simple as more is better/worse less. It depends.
Opening a new account has two NEGATIVE effects. First, you suffer an inquiry which pulls your score down a little. Second, you suffer a reduction in your average age of accounts. Specifically, when you open your Nth account, your AAoA drops to (N-1)/N. For example, if your AAoA was 12 months and you open your 4th account, your new AAoA is (12*3)/4 or 9 months.
However, that (N-1)/N formula can start working in your favor once you have a lot of accounts. If you have 11 accounts and you open your 12th, in the above example your new AAoA would be (11/12)*12 = 11 months. As you can see, that is only a 1 month penalty on your AAoA for your 12th account where it was a 3 month penalty when you opened the 4th account. So you can see that having a large number of accounts "protects" your AAoA from the penalty incurred by opening one more account.
A second benefit of having more accounts is that your utilization is going to be lower. Let's say you spend $3000 per month and all your accounts have a $5000 limit. When you had only 4 accounts your utilization was 3000/(4*5000)=15%, just from your regular spending, assuming you pay in full every month. But if you had 12 accounts with the same monthly spending your utilization would be 3000/(12*5000)=5%. You will certainly get a score boost for having a 5% utilization versus a 15% utilization!
So the ultimate answer is "it depends", opening all those accounts certainly lowered your average age, but then once you had them, and rebuilt your average age of accounts, it protects you. And having more accounts will naturally provide a higher total credit limit, lowering your utilization just from typical monthly spending.
My own assessment was that it's good to open a lot of accounts early in your credit history, and then stop. I spent the first year of my credit history opening up the accounts in my signature, I have seven credit cards and two PLOCs. I opened them quickly so that the AAoA penalty would hit me all at once when my total AAoA was low anyway, under a year regardless. I figure that now that raft of accounts will protect me as I add an account here or there in the future, and the total limit I have certainly helps me keep my utilization down pretty low.
BUT, having established that base of cards and having a total limit that works for me, I plan to open very few, if any, new accounts going forward. Basically, from here on in, I plan to garden other than perhaps mortgage applications.
@Anonymous wrote:
It isn't as simple as more is better/worse less. It depends.
Opening a new account has two NEGATIVE effects. First, you suffer an inquiry which pulls your score down a little. Second, you suffer a reduction in your average age of accounts. Specifically, when you open your Nth account, your AAoA drops to (N-1)/N. For example, if your AAoA was 12 months and you open your 4th account, your new AAoA is (12*3)/4 or 9 months.
However, that (N-1)/N formula can start working in your favor once you have a lot of accounts. If you have 11 accounts and you open your 12th, in the above example your new AAoA would be (11/12)*12 = 11 months. As you can see, that is only a 1 month penalty on your AAoA for your 12th account where it was a 3 month penalty when you opened the 4th account. So you can see that having a large number of accounts "protects" your AAoA from the penalty incurred by opening one more account.
A second benefit of having more accounts is that your utilization is going to be lower. Let's say you spend $3000 per month and all your accounts have a $5000 limit. When you had only 4 accounts your utilization was 3000/(4*5000)=15%, just from your regular spending, assuming you pay in full every month. But if you had 12 accounts with the same monthly spending your utilization would be 3000/(12*5000)=5%. You will certainly get a score boost for having a 5% utilization versus a 15% utilization!
So the ultimate answer is "it depends", opening all those accounts certainly lowered your average age, but then once you had them, and rebuilt your average age of accounts, it protects you. And having more accounts will naturally provide a higher total credit limit, lowering your utilization just from typical monthly spending.
My own assessment was that it's good to open a lot of accounts early in your credit history, and then stop. I spent the first year of my credit history opening up the accounts in my signature, I have seven credit cards and two PLOCs. I opened them quickly so that the AAoA penalty would hit me all at once when my total AAoA was low anyway, under a year regardless. I figure that now that raft of accounts will protect me as I add an account here or there in the future, and the total limit I have certainly helps me keep my utilization down pretty low.
BUT, having established that base of cards and having a total limit that works for me, I plan to open very few, if any, new accounts going forward. Basically, from here on in, I plan to garden other than perhaps mortgage applications.
That's fine, but what about the 5 AU accounts that OP added?