Is it worth opening up a couple lines of credit now?
10-20-2012 04:05 PM
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:
- 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?
- Would this impact chances of getting the cards themselves? (Credit Karma currently predicts my score at 729)
- 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?
- Ultimately, what is the right decision here?