Moderator Emerita
Posts: 28,098
Registered: ‎04-01-2007
Re: Advice for young person (re)building credit?

Barrick wrote:

Thanks for the info on the cards! Would any one give me advice on weather applying would help or harm my scores?



This varies. In terms of the "new account" and "seeking credit" dings, if you have little or no open revolving credit (CC's), it should help your scores. If you already have maybe 3 or 4, there probably won't be much impact. If you have more than that, you'll probably see a drop.

Wherever you are, you should first calculate the impact on your AAoA (average age of accounts.) Take ALL the accounts showing on your reports, both open and closed, and figure how long they've been open, expressed in months. So if you have a closed auto loan opened in February 1998, it would be 11 years, 3 months old, or 135 months old. Do this for all the accounts on a report, add up the ages in months, and divide by the number of accounts to get your average age of accounts in months. Then figure that out in YY/MM.

The rule of thumb, learned the hard way by many of us here, is that you don't want to drop your AAoA under a whole number of years. So if your AAoA is 5y10m, and adding two accounts would drop it to 5y3m, your AAoA would still display as 5 years, and the only change would be that you have to wait longer to get to 6 years. But if your current AAoA is 5y4m, and new accounts would take you to 4y9m, your scores would probably be hurt.

I got killed on my scores when I picked up a bunch of new accounts, both from severely dropping my AAoA and from the new credit ding. I knew it was coming, but I felt that I needed to upgrade my credit profile, and so I waited it out, and now my scores are better than they were. But it took a solid year, and when it first hits, there's nothing quite like seeing a 75-point score drop. Smiley Tongue
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007