topic Re: Do CLIs count as New Credit? in Understanding FICO® Scoring

Do CLIs count as New Credit?

Anonymous — Wed, 08 Feb 2017 21:42:10 GMT

Hi,

my credit history is very short (1 year) but I am handling it very efficiently. I meanwhile managed to get some automatic CLIs without asking for them:

- AMEX: from $5,000 to $10,500

- Chase: from $5,000 to $6,500

- Synchrony: from $1,400 to $ 2,300

i.e. total of $7,900 automatic CLI during the last 3-4 months. This as such is great and I understand it as a positive signal by the lendors.

Now my question: When I check main aspects dragging my FICO score down, one major item shows up: "too much new credit" in recent months. Do these automatic CLIs count as "new credit" into my credit score (even though I was not actively seeking/applying for more credit)? And if so, how long is new credit actually considered as new?

Thank you!

Re: Do CLIs count as New Credit?

Anonymous — Wed, 08 Feb 2017 21:57:54 GMT

No. The reason codes you are seeing are referring to inquiries or to new accounts. A CLI is neither. (Though if you requested a CLI and that request resulted in a hard inquiry, the inquiry would itself be a ding, as you know.)

That said, a bigger credit limit does not in itself improve your FICO score. In other words, suppose Bob and Fred each have four cards and their profiles are identical: same age, same CC % utilization, same number and type of accounts, etc. The only difference is that Bob's cards each have a $1k limit and Fred's each have a 25k limit. The two guys will have the same scores, even though Fred's credit limits are 25 times what Bob's are.

So it's nice that you are getting bigger limits, but just bear in mind that they won't in themselves improve your score. In the example I gave above, Bob could spend $10,000 per month and still have a 1% utilization, as long as he kept paying down his cards, so big CLs aren't even necessary for big spending or low util.

Re: Do CLIs count as New Credit?

Anonymous — Thu, 09 Feb 2017 04:20:24 GMT

Great, thank you! Will be gardening for a while then until the "new credit" wears off. And the CLIs certainly help me to keep utilization low.

Re: Do CLIs count as New Credit?

Anonymous — Thu, 09 Feb 2017 04:57:57 GMT

CLI's are fine. Nothing wrong with them. And you are absolutely having the right attitude toward them, which is a kind of relaxed, Hey... Nice! But where you are not constantly seeking them out or worrying about them.

But it's worth remembering that you were really fine as far as your capacity to spend and your ability to have a low utilization before the CLI's. Before they happened you had a total credit limit of > 11k. You could have spent 20k per month easily and still had a 1% utilization. And my guess is that in the next 10 years there will not be even one month where you will spend even 5k.

As a quick side note, you mention three credit cards. Do you have any installment loans? If not, we can suggest a way to add 30 points or so to your FICO 8 scores pretty painlessly.

Re: Do CLIs count as New Credit?

nupey10 — Thu, 09 Feb 2017 13:09:04 GMT

Congrats on your increase....

Can someone help me out and tell me what "gardening" means?

Re: Do CLIs count as New Credit?

Anonymous — Thu, 09 Feb 2017 13:52:50 GMT

Gardening means to stop all applications for credit -- no more inquiries, no new accounts -- with the aim of allowing time to improve one's credit score. (Time does via allowing inquiries to become over 365 days old, by allowing Age of Youngest Account to become at least 1 year old, by allowing Average Age of Accounts to increase, etc.)

Gardening is also sometimes coupled with more active strategies like working with creditors to have derogs removed.

Re: Do CLIs count as New Credit?

Anonymous — Thu, 09 Feb 2017 14:52:14 GMT

@Anonymous wrote:

Gardening is also sometimes coupled with more active strategies like working with creditors to have derogs removed.

I agree. If there is the presence of derogs on one's file, during a period of gardening attempted removal of any/all derogs should be the goal. Depending on the severity/age/number of derogs, quite often their removal can result in greater increases than a year of gardening can accomplish. Combine these two factors and very good things can be accomplished over the course of a year.

Re: Do CLIs count as New Credit?

Anonymous — Thu, 09 Feb 2017 16:42:05 GMT

@CreditGuyinDixie: fully agree, I always spend a lot on my cards and pay them down a few days before the next statement period is up. Usually end up with utilization of 2-5% even though I use my cards much more than that. In recent months I also stated to pay all my cards down to $0 each month except for one. Hope this will give additional boost with just one card reporting a small balance and all others $0.

Have also a secured installment loan to gain some points on the installment side. Its been reporting since May and I also think that it already helped my score. Read about this in this forum and I am very thankful for the good knowledge available here. My FICO score is now in the region of 735 which I think is not too shabby having started from zero in January 2016.

Re: Do CLIs count as New Credit?

Anonymous — Thu, 09 Feb 2017 20:48:14 GMT

Hi T-moe! Congrats on all the progress you are making.

I'm curious... how much was your secure loan originally for? How much do you owe now? What is the term of the loan? (12 months, 36 months, 60 months, etc.) Is it the only installment loan you have?

Re: Do CLIs count as New Credit?

Anonymous — Thu, 09 Feb 2017 23:16:57 GMT

@Anonymous wrote:
Hi T-moe! Congrats on all the progress you are making.

I'm curious... how much was your secure loan originally for? How much do you owe now? What is the term of the loan? (12 months, 36 months, 60 months, etc.) Is it the only installment loan you have?

Thank you! And yes, it is the only installment loan I have (had to pay my car in full due to insufficient credit back then. Fortunately insufficient credit doesn't always mean insufficient funds). The secured loan is for $1,000 over 12 months and started in May 2016. Paying it it down regularly each month in installments of approx. $84. So current balance is around $330. Took this loan purely for credit building purposes.

Other than this loan and above mentioned credit cards, I only have another secured credit card ($2,000) from Wells Fargo. It was the very first card I could get when I came to the US. Still use it a bit, but mainly just keeping it because it is my oldest account and because I do not have many accounts yet, so at least it is reporting for me. Still hoping that it eventually graduates to an unsecured card, but if the next AF approaches and it didn't graduate by then, I will probably drop it.

Re: Do CLIs count as New Credit?

Anonymous — Thu, 09 Feb 2017 23:55:47 GMT

There's an ideal way to do the secured loan method of improving your score. It was discovered by Revelate and one or two other veterans a couple years ago. That's to take out a personal loan with a long term (like 5 years) and then pay off most of it early on but continue to keep it open for the full term.

This thread will explain all the details. All you need to do is read the first couple posts.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

Because your existing loan will be paid off in May, you may want to get started in a few weeks on the step by step process you'll see described in that thread so that your Alliant loan will be in place by the end of April.

Re: Do CLIs count as New Credit?

Anonymous — Sat, 11 Feb 2017 06:09:52 GMT

Thanks for the advice, but I'll be in the US for a couple of years only. I feel like I have been jumping through way more hoops than I wanted to already to achieve a halfway decent credit score. Feeling in good shape now and take it from there!

Re: Do CLIs count as New Credit?

Anonymous — Sat, 11 Feb 2017 06:37:36 GMT

OK. Expect that your FICO score will get better as you approach May. That's because your loan will become mostly paid off -- you'll only owe 1/12 of the original amount. But around June, when the loan reports as paid off, your score will drop by 25 points or more, since you will no longer have an open installment loan.

If you decide you want to prevent that, the SSL technique will be the thing you'll want to use.