topic Re: Strategy for Maximizing Credit Score in General Credit Topics

Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 03:12:32 GMT

Hey everyone! First post here, although I’ve been lurking for a couple months.

My question relates to achieving an optimal credit score (i.e. as close to 850 as possible). I’ve been fairly lucky in life so far, which has allowed me to make north of 150k a year by age 28 (Fiancé also makes north of 100K). As a result, I currently have 4 credit cards, which have a combined 89K in credit limits.

So, my question is, which would be better for my long-term credit score (3-5 years down the line): A) Keep the 4 cards I have, get some CLI’s here and there, and focus on AAoA or B) Continue to try and get ~25 - 30K credit lines to bolster my total credit portfolio, which would keep my utilization lower, as well as increase my total # of accounts, but would lower my AAoA.

I’m not looking at making any large credit purchases in the next few years (read: house or car), which is why I want to look 3-5 years down the road. Given hard inquiries roll off after 2 years, getting a number of hard inquiries now also doesn’t matter much to me.

I already put <10% utilization on the cards (although every now and then I will go over), and have credit scores in the 740-770 range, depending on the report. Let me know if you need any further information.

Thanks everyone!

Re: Strategy for Maximizing Credit Score

SouthJamaica — Thu, 06 Jul 2017 16:20:11 GMT

@Anonymous wrote:
Hey everyone! First post here, although I’ve been lurking for a couple months.

My question relates to achieving an optimal credit score (i.e. as close to 850 as possible). I’ve been fairly lucky in life so far, which has allowed me to make north of 150k a year by age 28 (Fiancé also makes north of 100K). As a result, I currently have 4 credit cards, which have a combined 89K in credit limits.

So, my question is, which would be better for my long-term credit score (3-5 years down the line): A) Keep the 4 cards I have, get some CLI’s here and there, and focus on AAoA or B) Continue to try and get ~25 - 30K credit lines to bolster my total credit portfolio, which would keep my utilization lower, as well as increase my total # of accounts, but would lower my AAoA.

I’m not looking at making any large credit purchases in the next few years (read: house or car), which is why I want to look 3-5 years down the road. Given hard inquiries roll off after 2 years, getting a number of hard inquiries now also doesn’t matter much to me.

I already put <10% utilization on the cards (although every now and then I will go over), and have credit scores in the 740-770 range, depending on the report. Let me know if you need any further information.

Thanks everyone!

Update 7/6/17 12:20 PM. Correction! Very sorry for my mistake. I meant Plan A. Letting your 4 accounts grow and letting everything age.

Re: Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 04:14:45 GMT

Do you have any open installment loans? If not, the Share Secure Loan Technique should be your next step for sure. You only need to read the first couple posts in this thread to find out all you need to know:

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

Like SouthJ, I'd lean toward adding more tradelines if the goal is long term. But just to clarify a possible misunderstanding, you don't need bigger credit limits to have an ultralow utilization. You can spend a lot on your cards, have a total credit limit of 2k, and still have a 1-3% utilization. You just have to pay down the balance before it reports. But having a bigger CL is more convenient it could be argued.

Two other things to bear in mind. (1) Your current style of having a fairly low utilization but not feeling like it it has to always be really low is perfect. An ulttralow util is only needed in the 40 days before an important application for credit, which won't be happening to you for years. (2) When you do need to squeeze out every additional scoring point (just before an important credit pull), you want to be lower than the 10% you mentioned. The actual line in the sand is 8.99%.

Re: Strategy for Maximizing Credit Score

jamie123 — Thu, 06 Jul 2017 04:50:48 GMT

B) Continue to try and get ~25 - 30K credit lines to bolster my total credit portfolio, which would keep my utilization lower, as well as increase my total # of accounts, but would lower my AAoA.

You should add more credit cards. This will lower your AAoA right now but will make your AAoA bulletproof in the future. In ten years time, if you have 8 to 10 credit cards at that point, with an average age of say 8 years, you won't have to worry about AAoA for the rest of your life. This will also build a thick credit file so when you do need to add or use credit, it will have a minimal effect on your score. Credit cards are the foundation of a great credit score.

You really want to have credit cards from the various so called Prime lenders because they will eventually give you high CLs and grow with you for life. These so called Prime lenders are:

AMEX

Bank of America

Chase

CitiBank

Discover

Wells Fargo

Good luck!

EDIT: Once your score is above 760, everything else is bragging rights. You will get the same interest rates and chance of approvals with a credit score of 760 as you would with a score of 850.

Re: Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 04:51:16 GMT

@Anonymous wrote:
Do you have any open installment loans? If not, the Share Secure Loan Technique should be your next step for sure. You only need to read the first couple posts in this thread to find out all you need to know:

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

Like SouthJ, I'd lean toward adding more tradelines if the goal is long term. But just to clarify a possible misunderstanding, you don't need bigger credit limits to have an ultralow utilization. You can spend a lot on your cards, have a total credit limit of 2k, and still have a 1-3% utilization. You just have to pay down the balance before it reports. But having a bigger CL is more convenient it could be argued.

Two other things to bear in mind. (1) Your current style of having a fairly low utilization but not feeling like it it has to always be really low is perfect. An ulttralow util is only needed in the 40 days before an important application for credit, which won't be happening to you for years. (2) When you do need to squeeze out every additional scoring point (just before an important credit pull), you want to be lower than the 10% you mentioned. The actual line in the sand is 8.99%.

I actually have 2 open installment loans for ~85K, as I just completed my MBA earlier this year.

Question on installment loans - if I were to pay off both of these loans, do they drop from my credit mix immediately, or do they stay on for a fixed period of time?

Also, thanks for the tip for credit utilization, was not aware that is how it worked!

Re: Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 05:02:29 GMT

I disagree with the above post. The OP does not need to add any other cards. He already has 4 which is more than is needed for optimal scoring. Unless he sees value in additional cards such as increased reward benefits, I see no reason to app now. The argument about AAoA is basically irrelevant. 5 years from now if the OP goes to apply for a mortgage, his AAoA may be 8 years, for example. If he apps a few times now, maybe it will be 7 years at that time. Not a significant difference. Conversely, if he doesn't app now but does a spree in 5 years, he's still going to drop his AAoA from say 8 to 7. The end result will barely be any different... And at that time he'll already have secured his mortgage in theory so the few points difference between an AAoA a year or so different when you're in the 6+ AAoA club isn't going to matter.

Re: Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 14:47:07 GMT

I actually have 2 open installment loans for ~85K, as I just completed my MBA earlier this year.

Question on installment loans - if I were to pay off both of these loans, do they drop from my credit mix immediately, or do they stay on for a fixed period of time?

Also, thanks for the tip for credit utilization, was not aware that is how it worked!

I paid my car off last year which was my only installment loan at the time. My scores immediately dropped over 30 points.

Re: Strategy for Maximizing Credit Score

SouthJamaica — Thu, 06 Jul 2017 16:21:00 GMT

@Anonymous wrote:
Do you have any open installment loans? If not, the Share Secure Loan Technique should be your next step for sure. You only need to read the first couple posts in this thread to find out all you need to know:

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

Like SouthJ, I'd lean toward adding more tradelines if the goal is long term. But just to clarify a possible misunderstanding, you don't need bigger credit limits to have an ultralow utilization. You can spend a lot on your cards, have a total credit limit of 2k, and still have a 1-3% utilization. You just have to pay down the balance before it reports. But having a bigger CL is more convenient it could be argued.

Two other things to bear in mind. (1) Your current style of having a fairly low utilization but not feeling like it it has to always be really low is perfect. An ulttralow util is only needed in the 40 days before an important application for credit, which won't be happening to you for years. (2) When you do need to squeeze out every additional scoring point (just before an important credit pull), you want to be lower than the 10% you mentioned. The actual line in the sand is 8.99%.

I carelessly made a mistake... I meant he should go with Plan A -- letting his 4 accounts grow and letting everything age.

Re: Strategy for Maximizing Credit Score

SouthJamaica — Thu, 06 Jul 2017 16:26:22 GMT

@Anonymous wrote:
@Anonymous wrote:
Do you have any open installment loans? If not, the Share Secure Loan Technique should be your next step for sure. You only need to read the first couple posts in this thread to find out all you need to know:

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

Like SouthJ, I'd lean toward adding more tradelines if the goal is long term. But just to clarify a possible misunderstanding, you don't need bigger credit limits to have an ultralow utilization. You can spend a lot on your cards, have a total credit limit of 2k, and still have a 1-3% utilization. You just have to pay down the balance before it reports. But having a bigger CL is more convenient it could be argued.

Two other things to bear in mind. (1) Your current style of having a fairly low utilization but not feeling like it it has to always be really low is perfect. An ulttralow util is only needed in the 40 days before an important application for credit, which won't be happening to you for years. (2) When you do need to squeeze out every additional scoring point (just before an important credit pull), you want to be lower than the 10% you mentioned. The actual line in the sand is 8.99%.

I actually have 2 open installment loans for ~85K, as I just completed my MBA earlier this year.

Question on installment loans - if I were to pay off both of these loans, do they drop from my credit mix immediately, or do they stay on for a fixed period of time?

Also, thanks for the tip for credit utilization, was not aware that is how it worked!

1. I misspoke before. I apologize for my carelessness. I meant that I would recommend Plan A... keeping and growing the cards you've got, and letting everything age. With 4 cards you could wind up getting a perfect FICO score.

2. If possible, you should pay the installment loans down to 9% or less but not to zero. When your overall installment loan utilization percentage is 1 to 9% you're in the sweetspot for that factor.

3. With 4 credit cards, optimal is to let 1 report a small balance, and 3 report a zero balance.

Re: Strategy for Maximizing Credit Score

SouthJamaica — Thu, 06 Jul 2017 16:24:43 GMT

@Anonymous wrote:
I disagree with the above post. The OP does not need to add any other cards. He already has 4 which is more than is needed for optimal scoring. Unless he sees value in additional cards such as increased reward benefits, I see no reason to app now. The argument about AAoA is basically irrelevant. 5 years from now if the OP goes to apply for a mortgage, his AAoA may be 8 years, for example. If he apps a few times now, maybe it will be 7 years at that time. Not a significant difference. Conversely, if he doesn't app now but does a spree in 5 years, he's still going to drop his AAoA from say 8 to 7. The end result will barely be any different... And at that time he'll already have secured his mortgage in theory so the few points difference between an AAoA a year or so different when you're in the 6+ AAoA club isn't going to matter.

Agreed. I misspoke before when I said Plan B, I meant to say Plan A.

Re: Strategy for Maximizing Credit Score

driftless — Thu, 06 Jul 2017 16:26:18 GMT

I would not add cards just to add cards. Once your cards age and you add a mortgage you should be fine. I would look instead at the cards that you have and see if there is a type of card that you would like to add the mix. For example do you and Fiance like to travel? If so, decide which ecosystem that serves you best, e.g. - Amex, Chase, etc., and then adjust your wallets accordingly.

Re: Strategy for Maximizing Credit Score

SouthJamaica — Thu, 06 Jul 2017 16:29:06 GMT

@driftless wrote:
I would not add cards just to add cards. Once your cards age and you add a mortgage you should be fine. I would look instead at the cards that you have and see if there is a type of card that you would like to add the mix. For example do you and Fiance like to travel? If so, decide which ecosystem that serves you best, e.g. - Amex, Chase, etc., and then adjust your wallets accordingly.

For score optimization he doesn't need any more cards. The longer he goes without applying for anything new....

-the older his oldest account gets

-the longer his average age of accounts gets

-the older his newest account gets and

-whatever inquiries there are disappear

All magic for his FICO scores.

Re: Strategy for Maximizing Credit Score

driftless — Thu, 06 Jul 2017 16:31:07 GMT

@SouthJamaica wrote:
@driftless wrote:
I would not add cards just to add cards. Once your cards age and you add a mortgage you should be fine. I would look instead at the cards that you have and see if there is a type of card that you would like to add the mix. For example do you and Fiance like to travel? If so, decide which ecosystem that serves you best, e.g. - Amex, Chase, etc., and then adjust your wallets accordingly.
For score optimization he doesn't need any more cards. The longer he goes without applying for anything new....

-the older his oldest account gets
-the longer his average age of accounts gets
-the older his newest account gets and
-whatever inquiries there are disappear

All magic for his FICO scores.

Agreed, my comment address his card mix unrelated to scores.

Re: Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 16:39:14 GMT

A useful thing at this point may be to circle back with our OP and ask how important it really is to get as close to 850 as possible.

Basically, why does he want that?

If he wants it for a trophy reason, that's totally ok. Then we can ask him what his timeline is for getting the 850 and give him the best plan.

If on the other hand he wants an 850 because he thinks that will give him a little bit of an edge with lenders (compared to him having a 790 say) then that's the misconception we need to clear up. Once he realizes that he won't get any advantage, he may have a more relaxed goal, e.g...

I want my score to go up (with occasional small dips) till it gets to the 820s. I have five years to accomplish this.

Getting the perfect 850 is fine, but it precludes other things. Like opening new cards to take advantage of huge signup bonuses, etc. Or the increased stability Jamie alludes to. Etc.

Re: Strategy for Maximizing Credit Score

driftless — Thu, 06 Jul 2017 16:53:56 GMT

I have often wondered what the upper score range is that supports changing your card mix every year or so adding a mortgage, etc., on a regular basis. I know that there are a lot of factors that go into it but 820 is my guess.

Re: Strategy for Maximizing Credit Score

SouthJamaica — Thu, 06 Jul 2017 17:05:30 GMT

@Anonymous wrote:
A useful thing at this point may be to circle back with our OP and ask how important it really is to get as close to 850 as possible.

Basically, why does he want that?

If he wants it for a trophy reason, that's totally ok. Then we can ask him what his timeline is for getting the 850 and give him the best plan.

If on the other hand he wants an 850 because he thinks that will give him a little bit of an edge with lenders (compared to him having a 790 say) then that's the misconception we need to clear up. Once he realizes that he won't get any advantage, he may have a more relaxed goal, e.g...

I want my score to go up (with occasional small dips) till it gets to the 820s. I have five years to accomplish this.

Getting the perfect 850 is fine, but it precludes other things. Like opening new cards to take advantage of huge signup bonuses, etc. Or the increased stability Jamie alludes to. Etc.

Yeah but some people have all the credit cards they need or want, and would rather just maximize their scores.

In any event, the thread is named "Strategy for Maximizing Credit Score"

Re: Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 17:43:00 GMT

@SouthJamaica wrote:
@Anonymous wrote:
A useful thing at this point may be to circle back with our OP and ask how important it really is to get as close to 850 as possible.

Basically, why does he want that?

If he wants it for a trophy reason, that's totally ok. Then we can ask him what his timeline is for getting the 850 and give him the best plan.

If on the other hand he wants an 850 because he thinks that will give him a little bit of an edge with lenders (compared to him having a 790 say) then that's the misconception we need to clear up. Once he realizes that he won't get any advantage, he may have a more relaxed goal, e.g...

I want my score to go up (with occasional small dips) till it gets to the 820s. I have five years to accomplish this.

Getting the perfect 850 is fine, but it precludes other things. Like opening new cards to take advantage of huge signup bonuses, etc. Or the increased stability Jamie alludes to. Etc.
Yeah but some people have all the credit cards they need or want, and would rather just maximize their scores.

In any event, the thread is named "Strategy for Maximizing Credit Score"

It's often helpful to ask a person why they want a thing. The reason is that that they may be under the impression that they need to achieve X because of Y. Then, when you help them them understand that Y isn't actually the case, they no longer feel like X is important.

As I mentioned, he may simply want an 850 because he wants a trophy. Which I pointed out was fine. But it would be a shame if he pursued a multi-year credit strategy based on a mistaken assumption (e.g. that an 850 will get me an advantage with a lender over a 790, say).

Re: Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 20:20:43 GMT

Hey guys - OP here

Thanks for all of your input!

As for the questions regarding my goal - I don't "need" an 850 score, and I am aware that any score above a certain threshold will get you the best rates (780 or so). What I am interested in doing is maximizing my score for the long-term, so that when I do take out a mortgage or buy a car (or whatever I may need to do 5 years down the road), my current credit mix is good enough to still support the hit and keep me in super-prime teritory (in case multiple "life" events happen).

That said, getting specifically an 850 score for trophy reasons is attractive as well, just as long as I don't sacrafice my main goal.

Re: Strategy for Maximizing Credit Score

Anonymous — Thu, 06 Jul 2017 22:20:58 GMT

@Anonymous wrote:
Hey guys - OP here

Thanks for all of your input!

As for the questions regarding my goal - I don't "need" an 850 score, and I am aware that any score above a certain threshold will get you the best rates (780 or so). What I am interested in doing is maximizing my score for the long-term, so that when I do take out a mortgage or buy a car (or whatever I may need to do 5 years down the road), my current credit mix is good enough to still support the hit and keep me in super-prime teritory (in case multiple "life" events happen).

That said, getting specifically an 850 score for trophy reasons is attractive as well, just as long as I don't sacrafice my main goal.

Hello Seagraham.! The reason you are getting some mixed messages is the word "maximizing." If you mean that you want to know the single best strategy for you to have the absolute maximum score possible in five years, then go with (A). If you are fine with having a score that is a few points less, but still well over 810, then (B) is also fine.

In your initial post you seemed aware of some of the advantages (B) might have:

* You'll have a higher total credit limit (therefore easier to spend a lot and still have a utilization < 9%)

* You'll have more tradelines total, and therefore in the years to come when you to add a new tradeline your AAoA will take a smaller hit.

* It will enable you to take advantage over the next six months of any especially lucrative signup bonuses for credit cards (option A precludes that)

You also seem aware that some of the disadvantages traditionally associated with (B) do not apply to you, e.g. inquiries, your Age of Youngest account becoming low, etc. These are drawbacks only when a person might need to apply for credit in the next 1-2 years. That's not true for you.

So what you'll need to do is to weigh your desire to have a score that is at its very highest it can be, over and against your desire for the other advantages you are aware you might get from getting a few more cards in the next six months (but having a score of 810 instead of 820.)