Does adding a 4th credit card increase or lower credit score?

[MountainHiker]

Hi everyone. 

I have a FICO score question.  I have read that the first three credit card additions will each add as much as 50 points to one's over all credit score if your are below the 700s. 

My question is will adding a fourth or fifth credit card do the same or is there a point of diminishing returns after adding that third card? I seem to have a decent mix of types of credit because of my student loans which are aged and reporting in excellent status. My scores are in the 650s but I have two 5 year old unpaid charged off baddies in tow.

I know once those drop off, my scores will rise.  Just trying to find another 40 fico points in the meantime.  I'm reading credit file postings from posters with more and newer derogatories but still they have higher scores. But they all seem to have more open credit cards than I do. Just wondering if more tradelines will give my fico score a boost? 

Thank you for your input. 

[Horseshoez]

The answer to your question is both yes and no and it primarily depends upon how you pay your cards:

• Yes, your scores will improve:
  • If you tend to carry more than a trivial balance on one or more cards, then the additional credit line and additional total credit limit can help (once your scores recover from the score drop associated with a new application and new account).
• No, your scores will stay basically the same:
  • If you don't carry balances, there is no point benefit to having a fourth card, so once your scores recover from the new account drop, they will roughly recover to where they are now, all else being equal (which is almost never the case).

Long story short, if there is some tangible benefit from a new card for a rewards category currently missing or under-represented in your current lineup of cards, then it makes sense to apply for something new, otherwise, stand pat where you are now.

FWIW, I was perfectly happy with the four cards I had last year and had no intention of applying for something new unless/until I started traveling regularly again.  As things stand now, my wife and I only travel a few times per year, however, for my job I'm *supposed* be on the road every other week; so when the Chase associate helping me open up two new accounts asked me if I wanted a credit card, I opted for a Chase Sapphire Preferred card instead of a United Club card (which I would certainly have applied for if I was on the road on a regular basis).  If/when I start traveling again, I'll most likely apply for that United card.

[Kforce]

Not a scoring expert, however know that you can get 850 Ficos with three cards.

I don't see how getting a 4th or 5th card would help score wise.

One can argue other reasons.

With a larger set of aged cards, then getting a new card, the numerous aged accounts will lessen the average age of accounts number and help some.  This is beneficial for those getting  a few new cards every year, stabilizing score movement.  If you only want/need a few cards, and only apply for a new card every year or so, the short term score hit means very little. It come back rather quick.  My best scores were when I had 3 cards and never applying for anything for more than 10 years.

[Horseshoez]

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@Kforce wrote:

Not a scoring expert, however know that you can get 850 Ficos with three cards.

I don't see how getting a 4th or 5th card would help score wise.

One can argue other reasons.

With a larger set of aged cards, then getting a new card, the numerous aged accounts will lessen the average age of accounts number and help some.  This is beneficial for those getting  a few new cards every year, stabilizing score movement.  If you only want/need a few cards, and only apply for a new card every year or so, the short term score hit means very little. It come back rather quick.  My best scores were when I had 3 cards and never applying for anything for more than 10 years.

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^This!  My best scores were with 3 cards and not applying for anything for at least 2 years.  I now have 5 cards with roughly twice the limit I had a year ago plus a new car(ish) car loan, and I've dropped from a rough average of 835 across all 28+ of my FICO scores to a rough average of 765 now.  Given I'll most likely apply for a mortgage within the next year, it may be a few years before my scores get back up to where I was when I had a thin file of only 3 credit cards, an SSL (paid to under 9%), and nuthin' else.

[GZG]

there's no bonus points for 4th and 5th cards, adding a new card will simply lower your AAoA and set you back.

What you can do is ensure that of your three cards, only one of them reports a small balance ~1-2% while the other 2 report $0 balances

And pay down your loans as much as you can, ideally having one open loan paid down 91% 

You might be able to get around ~700 if you pay down the unpaid CO's, or you will be well beyond 700, probably, when your CO's fall off.

[Kforce]

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@Horseshoez wrote:

The answer to your question is both yes and no and it primarily depends upon how you pay your cards:

• Yes, your scores will improve:
  • If you tend to carry more than a trivial balance on one or more cards, then the additional credit line and additional total credit limit can help (once your scores recover from the score drop associated with a new application and new account).
• No, your scores will stay basically the same:
  • If you don't carry balances, there is no point benefit to having a fourth card, so once your scores recover from the new account drop, they will roughly recover to where they are now, all else being equal (which is almost never the case).

^^^ This is true.

Score's look at utilization as a factor.

Having 3 cards @20k each and reporting 7,500 use monthly will hurt scores more than 7,500 and having 20 cards with 400,000 CL

However managing, paying, checking for fraud,  putting worthless spend to keep alive, rotating, activating new arrival, etc, takes a lot of your monthly time.  For that once every few year auto loan, easy to just control when you pay for 1 month on your small set of cards. 

The best part is with 100+ card's, it is still necessary to manage when you pay and what cards report for highest score.  You can't solve the problem with more cards, it just makes it more work   

[JoeRockhead]

All great advice! But, no one has asked, why are you looking for 40 points @MountainHiker in the immediate future? Home purchase, a certain expense, or card you have your eye on?

[claus]

Not an expert on home purchase or mortgage. but the feeling I get is that you hardly need 800 or  750 to get best rates. Even at 700, the difference is miniscule. 

It matters more how much down payment you put down. After all, down payment is like a safety net for banks if things go wray. I dont think anyone is going to deny you if you put 45% down with 650 score. 

There are homes that for sure wont go down 40% or even 30% regardless how bad things get. Banks are in win-win situation. In fact, they hope you wont make payments so they can get your 45%. I actually dont understand why Banks are trigger shy even in current environment. '08 wont happen again. 

[MountainHiker]

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@Horseshoez wrote:

The answer to your question is both yes and no and it primarily depends upon how you pay your cards:

• Yes, your scores will improve:
  • If you tend to carry more than a trivial balance on one or more cards, then the additional credit line and additional total credit limit can help (once your scores recover from the score drop associated with a new application and new account).
• No, your scores will stay basically the same:
  • If you don't carry balances, there is no point benefit to having a fourth card, so once your scores recover from the new account drop, they will roughly recover to where they are now, all else being equal (which is almost never the case).

Long story short, if there is some tangible benefit from a new card for a rewards category currently missing or under-represented in your current lineup of cards, then it makes sense to apply for something new, otherwise, stand pat where you are now.

FWIW, I was perfectly happy with the four cards I had last year and had no intention of applying for something new unless/until I started traveling regularly again.  As things stand now, my wife and I only travel a few times per year, however, for my job I'm *supposed* be on the road every other week; so when the Chase associate helping me open up two new accounts asked me if I wanted a credit card, I opted for a Chase Sapphire Preferred card instead of a United Club card (which I would certainly have applied for if I was on the road on a regular basis).  If/when I start traveling again, I'll most likely apply for that United card.

---

That's brilliant.  Exactly what I needed to hear. Would it be beneficial to charge up a new card up to 30% of the limit then pay it off or at least down to a 2% utilization before it reports? That way the usage will be reported on statement date for that new card, and doing so while keeping the final utilization low. 

At the moment I have four credit cards.  My SavorOne rewards card was received only three weeks ago, and for that reason it's not yet reporting on the credit bureaus.  Think my scores went down only 6 points for that inquiry.  I'm hoping when it reports by the end of May or early June there might be a 20+ fico score point increase. 

I'm trying to move cautiously while looking for additional points where they can be mustered. My credit scores recently went up by 50 points on every credit bureau because every student loan was bought and paid in full by a new student loan servicer. That was a unexpected bonus that put me in the mid 660s.

It was right after that score change that i apted for the SavorOne card and surprisingly was approved. 

I also called and had my Bloomingdales limit increased from $1000 to $3500. Not 100% sure if I will see any type of fico score increase after that reports in a few days. I am hunting and piecing together points where possible.  I considered having my Macy's credit line increased as well but wanted to see the results of the Bloomingdales limit increase worked out. 

I've heard it's possible to experience a credit score decrease even after a CLI on an existing credit card despite there being no hard pull.  

I can only dream about a Chase credit card.  Congratulations on having those wonderful credit cards.  You obviously have been doing the right things. I would tell anybody willing to listen, to please protect your credit even if it means going without certain extras in life.

Because the rebuilding process of turning a bad credit profile into a good credit future requires a lot. It reminds me of the old saying a "ounce of prevention is worth a pound of cure"!  And boy is that true.

[Gmood1]

@MountainHiker 

Add a fourth if you want it. Yes it will ding you, but it will also recover quickly.

I added 3 CCs at once a couple months ago. Lost 3 points. Those 3 points are already back. 

Once those baddies drop. You'll get around a 100 point boost!

Try not to over think this stuff.

I can tell you from experience. No matter what, as long as you pay your bills. Your scores will rise. Regardless, if you add 1 CC or 10. Your scores will still go up. No one here knows the algorithms used by the credit bureaus.

I've opened and closed over 100 tradelines in the last 9 years. All of my scores are in fact in the 800s. EQ is presently a 831. 

 9 years ago I was in the mid 600s.

You are going to be just fine.

If you want it, grab it. If you don't have use for it, close it. 

You'll eventually get back in with Chase. It's all a matter of time.  If you are happy with 3 or 4 CCs.. roll with it.