DoI REALLY need another CC?

[Anonymous]

I'd just like to offer my go-against-the-grain response I give whenever this topic comes up with the recommendation to have 3+ cards for optimal scoring purposes.  From the data points I've seen, the benefit of 3 cards over 1 on FICO 08 Classic scores seems to be an average of about 8 points.  Some have reported a little more or a little less.  Certainly, it's something that's profile-dependent.  I'd also like to point out that for the better part of a decade I had only 1 credit card and my scores were always right around 800, +/- 10 points.  My point here is that a top notch score [based on what that score can get you] is definitely possible without having 3 or more credit cards.

[Anonymous]

Hi BBS!  I know you and I have chatted about this before.

There are basically two key things that need to be mentioned when this subject comes up.

(A)  Although the benefit of having several credit cards (compared with one) might well be overstated with respect to FICO 8, I think based on what Thomas Thumb and others have found they are much clearer when we are talking about the old mortgage scores.  Those old models really do seem to like it when a person has one card showing a positive balance with at least a few $0 balance cards.

(B)  Although the benefit of having several credit cards (compared with one) might be overstated, the benefits of several accounts (compared with only 1-2) are again much clearer.   All FICO models (as far as I know) place a ceiling on a person's score if he has only 1-2 accounts (and the models make his profile much more sensitive to new credit).

And with either A or B, the time to begin getting extra cards (or accounts) is way in advance of when you think you might need the scoring benefit.  Bad idea to wake up (two months before you buy your house) and suddenly decide to add accounts, which as we all know hurts your score in the short term.

Although in theory (B) can be met through various kinds of installment accounts, no annual fee credit cards are the simplest and cheapest way to add accounts to a profile.  And as far as I understand it, (A) can only be met with 3+ cards.

[capricornchanges]

so, all in all, the majority is FOR additional cards from what Im reading. As I stated, I am looking for Maximum score boost right now and did get 30+ points in opening just the one CC. So I have a $300 Cap1 that I opened in January. I am looking to the Jewelers Club (5K) limit as my next go to as it is guranteed and I dont want an inquiry right now with a so-so chance of getting it. That will be 2. Looking to buy a home by year end and while I know 24 months of CC is the ideal, I am figuring on this being better than the zero CC I had until now. Probably will apply for Discover IT after Jewelers club reports.

[Anonymous]

You are going to need to balance the advantage (to the mortgage models) of having three cards when you begin shopping for a house against the harm that is caused by having opened three credit cards in the 11 months before underwriting begins.

My guess is that if you can get all three cards in place 7 months before pre-approval, then the three cards are the right choice, but it is still a guess.  I would certainly not go to four cards, given your plans for the house.

How many other accounts do you have on your reports besides the new credit card?  Do you happen to know the age of your oldest account?  Have you pulled your reports and created a list of all your lates and other negative marks?  It is possible you might be able to get those removed.

[Anonymous]

CGID,

Good call on the necessity of clarifying thick verses thin file when having this discussion.  I'm always under the assumption of a thick file and always speak from that perspective, but no doubt there are people out there that have 1 revolver and due to few or no installment loans certainly have a thin file.  My comments regarding the limited scoring benefit of 3 revolvers over 1 is definitely limited to files that have at least a handful of accounts.

I can't speak on the mortgage models, only on FICO 08 really.  My FICO 4 score is the only one I've had access to and that's fluctuated from about 785-803 based on the number of cards (percentage) with balances reported.  I would say that's about double the amount that my FICO 08 scores tend to fluctuate.  It's not a real apples to apples comparison though, as I have 6-8 cards [reported] depending on bureau and the discussion is about 1 verses 3.  The OP hadn't mentioned a mortgage until later on in the thread, so I wasn't considering that angle.

With the OP looking toward a mortgage in the next 10-11 months, I personally would advise against additional cards and simply invest time and effort into clearing up whatever negative information exists on his credit report that's keeping his scores out of the 700's.  I can say with 100% certainty that a potential mortgage lender would much rather see the OP with a single $300 revolver on his file (at 1% utilization) and a clean credit report sporting a 700-740 score rather than 3 (2 recent) credit cards on a dirty file with mid-high 600's. 

[Anonymous]

Yup, I agree with you BBS.

And the good thing about the negative marks is that our OP can make the (correct) decision now to begin working with the people here on identifying and attempting remove his negative marks independent of whether he does or does not choose to add more cards.  In other words (as I am sure you'd agree) it is not an either/or.  They are two separate decisions.

Unfortunately, with negative mark removal (as you well know) there's no way to know if the bad marks will be able to removed in time.  The OP might start the removal attempt and get lucky -- all removed in the three months.  They also may be eventually removed but he might not get lucky until next year.

So our OP will have to start the process and hope for the best, but the CC question may have to be made independently of it.

[Anonymous]

Very true. OP, would you mind taking the time to list out any negative items you have on your credit report along with their severity and age? Naturally the fewer the better... if you don't have that many you may stand a strong chance at getting them removed in time.

[Anonymous]

(B)  Although the benefit of having several credit cards (compared with one) might be overstated, the benefits of several accounts (compared with only 1-2) are again much clearer.   All FICO models (as far as I know) place a ceiling on a person's score if he has only 1-2 accounts (and the models make his profile much more sensitive to new credit).

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Hi CGID,

Does this concept (FICO models placing a ceiling on score on a profile with 1-2 accounts) refer to only active accounts? For example, is there a difference in terms of FICO scoring between a profile with 8 open and 2 closed tradelines vs another profile with 2 open and 8 closed tradelines, all other factors being equal?

[Anonymous]

Hi M100.  My understanding has always been that, as far as scorecard assignment goes, FICO counts both closed and open accounts, and then, only if that total number is small, are you assigned to a scorecard for thin profiles.  Thus in your example, both profiles would have ten accounts and the person would be considered "not thin."

That's conjecture however.  It is possible that all FICO considers in this scorecard assignement decision is the number of open accounts.  Hopefully you can get contributor Thomas Thumb to chime in.  He is better informed on scorecard assignment issues than I am.

I am also unclear where the cutoff would be.  Perhaps three accounts is enough?  Perhaps the rule is more complex like:

If open accounts are < 3 and total accounts are < 4 then

     profile is thin

Perhaps some models define it one way some another?  There are at least four big model families out there (FICO 98, FICO 04, FICO 8, FICO 9) with flavors within them.

The good news is that by gradually adding accounts over time, you will be certain to meet all possible definitions of "not thin."  Six accounts is probably more than enough.

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My AAOA is 4.7 yrs, oldest being 17 yrs, 1 auto that is 28 months old and student loans. Have been getting negatives deleted with PFD or on a technicality. Recently consolidated my federal student loans so a total of two right now and two private loans. Self lender is also due to report end of Feb. I have no delusions that the inquiry won’t hurt, but I gotta take the hit sometime if I expect to get the card. Have cap1 down to 28% and working toward 8% then 1%. Figures if I do it now as least they can age before mortgage Pre-Approval.