Advice for Account Mix and Opening Strategy?

[blb2397]

I have been rebuilding for the last three years and find myself in the low 700s for the first time in my life. I am trying to figure out the most helpful next moves. 

The only knocks on my report are 

average age - less than three years

low accounts - only 6

account mix - only credit cards.

I was thinking of perhaps adding my first prime credit card and possibly an Upgrade loan for max 500 and pay in max two years.

This lowers my average of course but gives me mix and a couple of more accounts.

I just don't know if this is a bad plan or how everyone would tweak it to be more efficient. It will cost me some money in finances on the loan so I don't know if it is worth it just to help with the mentioned scoring factors??

Looking forward to feedback and advice.

Thanks as always.

[4sallypat]

Yes you are thinking correctly.

Get a mix of credit in your profile and your score will go up quicker.

Card debt overall should be less than 9% utilization.

Consolidate all card debt and open an installment loan (Discover, SoFi, CU) - don't get a predatory loan like Upgrade or Best Egg.

Keep at least one card active.

If you get an auto loan or lease it will also help.

I was in a similar situation as you and did all that a few years ago (thanks to my mortgage broker) when my scores were in the low 600s and now I am in the mid 700s.

[Loquat]

Congrats on the rebuild. Moving to the 700's is a big deal if one has never been there.

With that being said, and others may have a different opinion, but I would never spend money to please a scoring algorithm.

If you have a need then the argument changes...but if only to please a FICO score, I'd suggest letting your score increase via usage, payments, and aging of accounts.

One thing to know is that when you fix one suggestion by FICO it'll only generate another. The target is constantly moving and it's very hard to get in front of it.

Today it says credit mix, you fix that and it'll be inquiries that hold you back the next time, you can fix that and it'll suggest that lack of mortgage or something else is what's holding you back - constantly changing. 

It isn't something worth chasing in my opinion. Responsible usage and time will help with a lot of what you're probably wanting to accomplish.

With that being said, if you're going to pick up a card, then I'd suggest one that you can at least find some good use for and if it comes with a sub, even better.

I'm sure others will chime in with some good advice, thoughts, and opinions.

Best of luck to you in whatever you decide.

[Anonymous]

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@blb2397 wrote:

I have been rebuilding for the last three years and find myself in the low 700s for the first time in my life. I am trying to figure out the most helpful next moves. 

The only knocks on my report are 

average age - less than three years

low accounts - only 6

account mix - only credit cards.

I was thinking of perhaps adding my first prime credit card and possibly an Upgrade loan for max 500 and pay in max two years.

This lowers my average of course but gives me mix and a couple of more accounts.

I just don't know if this is a bad plan or how everyone would tweak it to be more efficient. It will cost me some money in finances on the loan so I don't know if it is worth it just to help with the mentioned scoring factors??

Looking forward to feedback and advice.

Thanks as always.

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Adding another credit card will not do anything for you.   It will not boast your scores or make them go up faster.  If anything I would get an installment loan.  You normally want a mix of credit esp. if you have new or challenged credit.   So I would forget about credit cards unless you're asking for CLI on them and focus on getting an installment loan.

[blb2397]

I have zero credit card debt. I just thought I might need more accounts. I only have six and supposedly hurts my score. I wanted to do the loan to help my mix but the ones recommended here seem to be a minimum of 2500 which I do not want to do.

Thanks for the feedback!

[Taurus22]

The advice given so far is great. But I somewhat disagree with one point....spending money to increase your FICO. And I'm only saying this due to my own experience. When I started out, I did all my homework on credit and saw that credit mix was a factor in scoring and I wanted to make sure I had that box checked. I did it via secured installment loan....What I did was:

1) Had a talk with my bank manager, explaining I was trying to build credit and what I wanted to do (I had already read about success with this method online)....he completely understood.

2) Opened a 6-mth $1000 CD (certificate of deposit) at my personal bank (some banks also allow as low as $500)

3) Went back to bank the next day and took out a 6-mth $1000 secured loan, using that CD as collateral

4) Deposited that money back into my Savings to keep it separated from my Checking

5) Paid the loan back each month with the exact same money in my Savings that I kept separated (was ~$170/mth)

6) When the 6 months was up, the loan was paid off (with about $70 total interest I paid) and the 6 month CD officially matured, returning my $1000 to me again

By doing this, sure.....I paid about $70 for a closed/satisfied installment loan....but in the big picture, it has more than paid for itself by the boost I got in my overall credit profile. I considered it a one-time investment. (Although I ended up doing it twice, "just because".....so ultimately I paid ~$140) And I am fully convinced that it helped open doors for me.

So, I am certainly not discrediting anyone's statements....no one should ever have to pay for credit. But I was willing to do so, and chose to do so, in the beginning to get my profile headed in the direction I wanted it to go.

[SouthJamaica]

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@blb2397 wrote:

I have been rebuilding for the last three years and find myself in the low 700s for the first time in my life. I am trying to figure out the most helpful next moves. 

The only knocks on my report are 

average age - less than three years

low accounts - only 6

account mix - only credit cards.

I was thinking of perhaps adding my first prime credit card and possibly an Upgrade loan for max 500 and pay in max two years.

This lowers my average of course but gives me mix and a couple of more accounts.

I just don't know if this is a bad plan or how everyone would tweak it to be more efficient. It will cost me some money in finances on the loan so I don't know if it is worth it just to help with the mentioned scoring factors??

Looking forward to feedback and advice.

Thanks as always.

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Don't add anything just for score purposes. 

[dmFICO8]

What is your goal rebuilding your credit score? Score 850 should not be your goal if you don't plan to use it.

Do you simply want to have a good score when you may need in the future just in case? Or a specific goal like I want to buy a house/car in 2 years so I want to have a 760 FICO score for best interest rate? Or want to maintain a high score to take advantage of credit card sign-up bonus annually?

You just want a good score for near future, I agree with others that you don't have to do anything extra, just keep using the cards responsibly and let the time does its work.

You want a score boost within 3~6 months for some interest rate hurting, then I strongly recommend you to do the Share Secured Loan technique (aka SSL technique) for average 30 points boost. I personally wouldn't want more than $10 interest as "maintainence fee" for SSL annually and the SSL term is less than 60 months. Go here SSL Technique, read Link 1 Post 1 for full explaination then read Link 3 for updated info, you can skip link 2 now.

If you want to maintain a high score to take advantage of credit card sign-up bonus (SUB) annually, there will be a lot more works for you to do. You need to have an app or spread sheet or some sort of tool to keeping track of your credit cards, keeping them active, building up Average Age of Accounts (AAoA), by far I consider hardest because requiring you app for new cards with SUB, which drags down your AAoA, but neccessary, taking much longer than just building up a high score.

[blb2397]

Great feedback thanks..I was looking at maximizing score for mortgage pre approval in about a year.