Don't use credit cards - should I get some to improve FICO?

[Anonymous]

Ok I make enough money that I really don't have no need for credit cards and so I don't have any.  I've always paid cash for everything, or paid with my DEBIT card.  I have been looking at refinancing my home and I checked my FICO score.  It's about 670.  I have no credit cards at all.  Should I get some?  I looked and saw evidence that they do help with the score, but I really can't find any advice for how many to get.  I also saw statements indicating that opening new credit can actually reduce my score. 

Given that my goal is to improve my FICO score:

If I want to refinance within the next 6 months, should I bother getting credit cards?  If so how many and at what limit?  Remember they will only be used as a tool to increase the FICO score

Long term, should I get some?  If so how many and at what limit?  Remember they will only be used as a tool to increase the FICO score

Is using a DEBIT card pointless in terms of FICO score?

I am really looking forward to any advice I can get!  It's frustrating wanting to improve the FICO score but being afraid to do so.  Thanks so much for any help!!!!!

Message Edited by meeeeeeeeee on 02-14-2009 04:12 PM

[moondog7324]

If your goal is refinance- I would be leery of opening new accounts- or getting inquiries. If your sure your going to be 6 months from refinancing the most I would get is 2 cards. Keep them about 10% utilization. DO NOT go hog wild on applications. The goal would be two cards in two apps. Have you got enough funds to do a BOA secured? or a Credit union secured? I would get cards with 1000 limit if you go the secured route.

I'm no expert- I can only tell you what helped me. Results may vary.

What kind of accounts are showing on your report? 

[Anonymous]

Thanks for the follow-up!

I do have enough funds to go the secured route.  I am a bit leery of even attempting to apply for credit because I read it can damage credit if I am denied.. and that's the last thing I need when I'm trying to improve it prior to a refinance.  The advice I see out there is to maintain no more than 7% of the balance of the card, and I see some reports of certain credit card companies (capital one for example) who report the highest balance as the credit limit.  If I get one of those companies and I spend $15 every month on a card just to get credit, I'm worried that it would show 100% credit utilization ($15 monthly/$15 credit limit).  Maybe I'm worrying too much.

My current report has a mortgage loan, auto loan (again, I only used it for credit purposes), and a couple 0% APR credit lines for furniture purchases (again, credit purposes only).  It sure is frustrating living debt free and getting screwed on mortgage loans because of a lack of credit (did I say credit?  I meant debt-history).  I'll start looking around, but does anyone know of a good company that would not turn down a 670 credit score for a secured credit card?  I'd like to avoid BofA for personal reasons (they wronged a family member in the past).

[Anonymous]

Moon. I doubt a first card for a person who has already purchased a home will do anything but raise a FICO score for a vast improvement in mix. First credit cards almost always immediately improve FICO scores as well. Not having ANY revolving credit of any kind has never done anything good for a responcible credit user. Correct me if I'm wrong people.

[Anonymous]

If i were you i would get a bofa secured with 1k deposit then if you have the cash in 8 months add more so when it unsecured(9-10 months) you will have large limit. From what i see most people gain points from their first 2-3 cards they add but the one could possibly bump you over 700 YMMV of course

[Anonymous]

Hey meeee, welcome.

I don't think there is a bank out there that hasn't wronged most of us one time or the other but a secured Bank of America credit card would probably be the perfect solution for you....and maybe a simple gas (the store card for your mix) card for a fine starter. Sit tight after that.

Of coarse I don't think BofA ever forgets chapter 7s if you've ever had one, regarless of current FICO score in which case a credit union CC would be the best aproach possibly. Lots of lenders will issue a card with a 670 score unsecured but I would try a secured in a better place than an unsecured in a sub-prime place and let a year go by, then shoot for a really nice prime card.

Message Edited by beenthere on 02-14-2009 08:45 PM

[haulingthescoreup]

Normally we tell people no apps within 6 months of a mortgage app, but when you have no CC's at all, there might well be a point. Are you working with a lender yet? I'd get advice there.

I'd go along with the others on BofA secured or a card from a local credit union; possibly from your current bank. The nice thing about a CU is that you might be able to get an educated guess from a loan officer before the formal application. Print out your EQ score and report (with a very current date) and let the loan officer check it out. You'll still have to do the real thing, of course. Be sure to find out if they do secured as well, and if and how it unsecures. (This might work as well with your local bank, of course.)

The good retail card option in terms of your scores in Macy's, but I don't know if they shy away from those without cards, so please do some research here first. If they want to see other cards first, let that bank card show up on your reports before apping again.

[moondog7324]

I never meant - don't get any cards- what I was trying to do is warn him of the dangers of going on app sprees. I've seen it too many times, someone gets a credit card and they see an immediate 20 point jump in scores- so they get the mindset that evrycard does that- well we know it doesn't work that way. A nice mix will increase your scores- but don't overdue it. I reccommend BoA because of the secured program and credit unions because they are easy to walk in and actually talk to a person.

[Anonymous]

Ah moon. All true.

[GregB]

I won't comment on a CC affecting your score as I know nothing about that.

1. Don't the 0% furniture loans appear on your report as credit cards? Check the catagories on your report. My Home Depot 0%, no payments for a year was a Home Depot Card. My 0%, no payments from The Great Indoors (Sears) appears as a regular credit card that could be used anywhere.

2. Where is the down payment for the house? The bank or institution that holds that would likely give you a card. If they don't, go talk to Schwab. With a deposit in an investment account, they will give you great interest and a CC and/or debit card.

You should sign up for Scorewatch so you can track the changes to your score as items appear and change. That way you can make sure your score is good before you tell the mortgage company to pull your reports. With a score of 670, you will be screwed on a home loan. The additional cost in a mortgage of being below 700 over the life of the loan is just amazing.

Message Edited by GregB on 02-16-2009 06:37 AM