Helping my daughter optimize her credit scores.

[FlaDude]

My daughter is in her late 20's, hopes to buy a house in a year or two, and I wanted to help her get her credit profile in the best shape we can. It will be at least a year from now, maybe even two or more, so a lot more lead time than some threads here where people want to improve their scores in a few weeks!

She's in pretty good shape already, but higher is better. Her EQ FICO 8 is currently 766. We've looked over her EQ report and will do the same with the other two soon. There are no derogs, we don't expect any on the other two either. AAoA 10y 4m, AoOA 34y 10m.

She has three open and one closed credit cards reporting, one of her own and rest as AU on mine.
1) Citgo/Citi (AU) - opened 1984, closed 2015, so this will report for 6 more years and gives her an AoOA half a decade older than she is!
2) Amex Gold (AU) - opened 1994, she was added as an AU long ago when Amex reported the account open date rather than the AU date so this is only 4 years younger than she is.
3) Citi Dividend - opened 2011, this is her only card. It has a 3k balance, was recently CLI'ed to $7k but is still reporting CL of $4.5k. Interest is $40/mo. I would expect a gain of a few points when the new CL reports.
4) Amex Blue (AU) - opened long ago, but shows on her report when the AU was added, last August, this is her newest account. $16.5k CL, PIF.
She was also an AU on my 24yo Slate account but I removed her last year because it had a high balance and was hurting her score. I expected that to keep reporting age, maybe it will on the other reports.

Other loans:
1) car loan opened 3 years ago, 10k balance, 3 years remaining.
2) student loans 4-5 years old, 8k balance, probably 2-3 years before paid off.

My thoughts are to improve UTI and add some depth to her profile by:

1) start paying more on the Citi with the goal of paying off in a year. We've discussed this and she agrees. She has enough in savings to pay it now, but likes having a financial cushion so she doesn't want to raid the savings account to pay it.

2) Open a couple of more credit cards, probably something with some SUBs and earning potential. We've discussed this and the importance of PIF every month, otherwise any earnings are negated by interest. If she opens them soon they'll have a little time to age, and shouldn't impact her AAoA much anyway.

Any other thoughts or suggestions?

[Anonymous]

The only thing she needs to do is focus on getting out of debt and saving for the downpayment.

[FlaDude]

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@Anonymous wrote:

The only thing she needs to do is focus on getting out of debt and saving for the downpayment.

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Thanks for the feedback. One thing that concerns me about relying so much an AUs is that if anything happens to me those accounts will be closed. I don't know if they stay on her report for 10 years after that or not in that case, and if the CL still keeps counting towards her overall CL. In any case, I'll be gone someday and I think getting another card or two now will help in preparing her profile for the long term when the AUs are history.

[HeavenOhio]

I agree with adding two cards, with the proviso that she has enough time to garden for a year before the mortgage.

I think the first new card should be one with a balance transfer offer. Ideally, she'd be at 28.9% or below on her Citi Dividend card when she applies. But she'll be at 43% utilization after the CLI reports. That may be OK too.

[FlaDude]

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@HeavenOhio wrote:

I agree with adding two cards, with the proviso that she has enough time to garden for a year before the mortgage.

I think the first new card should be one with a balance transfer offer. Ideally, she'd be at 28.9% or below on her Citi Dividend card when she applies. But she'll be at 43% utilization after the CLI reports. That may be OK too.

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Thanks. I think it will take more than a year before she has a decent down payment so if she gets a couple of cards now, and then gardens she should have enough time. Good point on the BT card. Depending on the starting CL, she could either save all of the $40/month in interest, or at least some and have both below 28.9%. My experience is heavily Amex and Chase centric so I'm likely to suggest cards in those families, but I'm open to other suggestions. The Amex BCE will give her 0% for 15 months with a 3% transfer fee, and $150 SUB for $1k spend. She is interested in earning travel too, because of where we live there is no dominant airline, but Southwest is the one that we fly most because it has good coverage for most of our destinations. Based on that I'm thinking CSP (50k UR SUB and referal for me) or possibly one of the Southwest cards (40k SW miles SUB), but again open to suggestion.

[HeavenOhio]

The big three balance transfer cards are the Slate, Bankamericard, and AMEX Everyday. These are the cards that have no balance transfer fees. The Slate and Bankamericard are pretty worthless after the BT period is over, but they can be PC'ed to other cards.

The only PC option on the Everyday card is to Everyday Preferred. So it's best if MR points fit into her plans. Because you mention travel, it might be a fit.

Of course, the cards you mention can work out too. Figure that the sign-up bonus would cover the balance transfer fee.

[FlaDude]

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@HeavenOhio wrote:

The big three balance transfer cards are the Slate, Bankamericard, and AMEX Everyday. These are the cards that have no balance transfer fees. The Slate and Bankamericard are pretty worthless after the BT period is over, but they can be PC'ed to other cards.

The only PC option on the Everyday card is to Everyday Preferred. So it's best if MR points fit into her plans. Because you mention travel, it might be a fit.

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I'll discuss it with her. JetBlue is her second most used airline so MR points might work although they appear to transfer at 80%.

[FlaDude]

Just to follow up, she applied for for the Amex ED (10k referral bonus to me) with 15k MR SUB, got approved for $10k and transferred her Citi balance there. She also applied for Chase Southwest Priority with 40k miles SUB, and was approved for $12.1k. 

At this point her plan is to pay off the ED before interest kicks in, and use the other cards to best points advantage and PIF each month. This will move her overall UTI below 8.9% and hopefully give her score enough boost to offset inquiries and AoYA reset. It will give her three cards in her name for the day (hopefully many years from now) when the AUs go away.

Thanks for the advice and suggestions.