topic Re: "Why" is 3 Credit Cards the "Sweet Spot??" in Rebuilding Your Credit

"Why" is 3 Credit Cards the "Sweet Spot??"

Anonymous — Mon, 10 Feb 2020 19:22:27 GMT

I'm reading that 3 open credit cards using the AZEO technique optimizes your score.

How does 2, or 4, or 5 open accounts change this?

Thanks for the input.

Re: "Why" is 3 Credit Cards the "Sweet Spot??"

thornback — Mon, 10 Feb 2020 19:28:06 GMT

It's 3 minimum... more is fine. Less is problematic because there is a FICO penalty for "too many accounts with balances". Because of this penalty, it is recommended to have no more than 1/3 of your cards report a balance. You can't do 1/3 with anything less than 3 cards; having 1 of 2 would be 1/2, having 1 of 1 would be 100% - both would result in a penalty.

Also, it thickens your file which places you on a better scorecard as your accounts age.

Re: "Why" is 3 Credit Cards the "Sweet Spot??"

Anonymous — Mon, 10 Feb 2020 19:40:09 GMT

This ^^

Re: "Why" is 3 Credit Cards the "Sweet Spot??"

KJinNC — Mon, 10 Feb 2020 20:00:20 GMT

Three is not the sweet spot, three is the minimum to avoid the score penalty. As for why it's the minimum, I guess something had to be Three seems like a reasonable number.

As for AZEO, it's a short-term, non-cumulative boost that is most helpful when trying to get your score up before an important application. It's not really a rebuilding strategy per se, since there is no memory to utilization in FICO 8.

Re: "Why" is 3 Credit Cards the "Sweet Spot??"

Remedios — Tue, 11 Feb 2020 00:15:07 GMT

It's profile dependent

For me, with FICO 8 classic, as long as less than 50% of cards report balances (and utilization is in check), there is no scoring penalty for number of cards with balances. If more than 7 report, there is a penalty that increases with each subsequent card that reports.

Older scores have a heart attack at two or more, regardless of utilization.

Re: "Why" is 3 Credit Cards the "Sweet Spot??"

Anonymous — Tue, 11 Feb 2020 12:31:52 GMT

@thornback wrote:
It's 3 minimum... more is fine. Less is problematic because there is a FICO penalty for "too many accounts with balances". Because of this penalty, it is recommended to have no more than 1/3 of your cards report a balance. You can't do 1/3 with anything less than 3 cards; having 1 of 2 would be 1/2, having 1 of 1 would be 100% - both would result in a penalty.

Also, it thickens your file which places you on a better scorecard as your accounts age.

Is this 3 credit cards ONLY or a mix between credit and store cards? Asking for a friend.

Re: "Why" is 3 Credit Cards the "Sweet Spot??"

Anonymous — Tue, 11 Feb 2020 13:35:18 GMT

If I understand correctly, from a strictly FICO scoring perspective there is no difference between scores gathered from using store cards vs major cards.

Other pros and cons come into effect, but not necessarily from a straight scoring perspective.

Re: "Why" is 3 Credit Cards the "Sweet Spot??"

Remedios — Tue, 11 Feb 2020 14:51:40 GMT

@Anonymous wrote:
If I understand correctly, from a strictly FICO scoring perspective there is no difference between scores gathered from using store cards vs major cards.

Other pros and cons come into effect, but not necessarily from a straight scoring perspective.

Correct. To FICO, a card is a card. What matters is that they are paid on time.

Some people do experience a small drop when store card is the only one reporting balance