Hit on AAoA vs. Boosting Total Credit

[Anonymous]

Before I did an app spree this month of May...

I am sitting on less than $2,500 of total available credit on my 2 cards(CapOne QS and Discover) which are both pretty new, the oldest one's only 1yr and 2 mos old and the other one is just 9 mos old.

Before doing an app spree I was sitting on not more than 710+ across the board. I got approved for 2 bank credit cards(AMEX BCE and CITI DC), an Amazon Store Card, and 3 other store cards from Comenity thru SCT...

I know my AAoA will take a huge hit, but the thing is from $2,500 I now have a $24,000 total of available credit.

I just wanna ask your thoughts on what I just did. Was it a huge mistake? Will the increase in total amount of credit balances out all the negatives; 3 additional inquiries, 6 new accounts, etc.? I was thinking of growing them together.

I actually wanna close down one of the new store card, is that advisable? I feel like I dont really need it and I just got too overwhemed.

Can someone help me understand the pros and cons of my decision? Thanks!

[SouthJamaica]

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@Anonymous wrote:
Before I did an app spree this month of May...

I am sitting on less than $2,500 of total available credit on my 2 cards(CapOne QS and Discover) which are both pretty new, the oldest one's only 1yr and 2 mos old and the other one is just 9 mos old.

Before doing an app spree I was sitting on not more than 710+ across the board. I got approved for 2 bank credit cards(AMEX BCE and CITI DC), an Amazon Store Card, and 3 other store cards from Comenity thru SCT...

I know my AAoA will take a huge hit, but the thing is from $2,500 I now have a $24,000 total of available credit.

I just wanna ask your thoughts on what I just did. Was it a huge mistake? Will the increase in total amount of credit balances out all the negatives; 3 additional inquiries, 6 new accounts, etc.? I was thinking of growing them together.

I actually wanna close down one of the new store card, is that advisable? I feel like I dont really need it and I just got too overwhemed.

Can someone help me understand the pros and cons of my decision? Thanks!

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It doesn't really matter, it's in the past.

You'll take a small hit, but it's only a temporary one, and not long term at all. You would have been better off skipping the store cards, but they won't kill you.

Now you should garden, and yes you can feel comfortable closing one, or even all, of the store cards. You don't need those suckers, you're big time now, with Citi, Amex, Discover, and Capital One.

[Anonymous]

South Jamaica---  just wanted to ask, looking at your siggy,   do you actually use all of those cards each month to keep them active ?  or how do you manage that many cards ??

[Anonymous]

OP, I wouldn't say your AAoA is going to take a "huge" hit as your AAoA isn't very high right now.  I'm not sure if you have other accounts on your credit report aside from your two CCs, but if not your AAoA is only about 9 months.  In adding 6 new accounts, your AAoA will drop to 2-3 months.  This is only about a 6 month difference, thus in 6 months or so you'll be right back to where you were pre-spree.  Your one CC was 9 months old meaning that your AoYA was already less than 1 year, so it dropping to 0 shouldn't impact your score much.  Granted, it will take you 1 year to bring your AoYA to a year rather than 3 months if you didn't spree, but it shouldn't harm your score much.  The inquiries are what they are and IMO are one of the least scoring-impactful ingredients.  In a year they are completely gone from scoring impact and most suggest their impact is diluted considerably within 6 months. 

I agree with SJ that those store cards aren't going to help you much and it wouldn't be a bad idea to close some or all of them.  If there's one that you know you'll use every month then fine, perhaps hang on to that... but otherwise they won't do you any good.

I agree that gardening is the way to go for the next year and during that time hit the Discover SP CLI button every few months and mark your calendar for Amex 3X CLI requests.  If you haven't requested one yet, you're already able to ask for one now.  If you get it, wait 180 days and ask again.  Discover and Amex are two cards that are able to grow rather quickly if you desire.

[Anonymous]

Thanks guys. That is what I thought, since I'm still pretty new to the game might as well do a spree now and let the cards grow together than do it later.

I got 4 store cards.

Amazon - $5000
Overstock - $2000
JCrew - $1250
Express - $1000

I am planning to keep Amazon and Overstock and I might close down 1 or 2. Catch is I just opened them, got a lil overwhelmed by SCT soft pulls and now I just regret going for those cards. Does closing them right away gon hurt me? or should I wait for a couple of months before pulling the trigger?

[Anonymous]

It doesn't matter honestly.  The only thing that can "hurt" by closing them is that you lose whatever the CL is of that account from your total credit limits.  Those cards have pretty small limits though, so I don't see them being very impactful in terms of buffering for utilization.  Outside of that, there is zero impact in closing them right away.  Some would argue the opposite, that closing them only provides a more favorable look to anyone viewing your file as in generally the less store cards, the better.

[Anonymous]

I'll think about it carefully, but I am leaning towards closing them now as I dont see using those cards anytime soon.

Thanks again! Really helpful tips!

[Anonymous]

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@Anonymous wrote:

I know my AAoA will take a huge hit, but the thing is from $2,500 I now have a $24,000 total of available credit.

Will the increase in total amount of credit balances out all the negatives; 3 additional inquiries, 6 new accounts, etc.?

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Hello Atmendoza.  Glad you have joined the forums.  Here are a few thoughts, for what they are worth.

You use the phrase "available credit" and "credit balances" when I am pretty sure you mean "credit limits."  Just to help you out with terminology (which will help you talk to people here)....

*  Your balance is how much you currently owe on a credit card.

*  Your credit limit is the most you could owe on that card.

*  Your available credit is the difference between your credit limit and the balance.

So if you had a credit limit of $1000 and a balance of $85 you would have $915 in available credit.  Your total credit limit is the sum of all of your credit limits across all cards.

You observe that your total credit limit has gone from $2500 to $24,000 -- and you want to know if the increase in your total credit limit will give you a boost to your score (i.e. counterbalancing the effect of the inquiries, etc.).

We can't say because we don't know for sure what your balances were.  If you had total balances of $2100 then the increase in total credit limit would help you a lot, because it would lower your utilization a lot.  But if you had balances reporting of $200, then it would not help you at all, because your utilization would have started at < 9% and they would still be < 9%.

The really key idea in that is that what matters is your CC utilization.  Your total credit limit in and of itself does not matter at all.  (You can have two guys with identical profiles and four cards each, except that one guy has limits of $1000 each and the other guy has limits of $25,000 each.  If they each have two cards at $0 and two cards at $100, then they will have exactly the same score.)

It's easy to get the wrong idea and think that getting big credit limits will improve your score.  It won't.  What will improve your score is having a low utilization and you can have one low limit card, spend a lot on it, and still have a utilization of 1-5%.

That's not to say that it is bad to seek, in a relaxed manner, higher credit limits.  It's just that you should not do it in the hope that it will improve your score.

[Anonymous]

Thank you! I got all the answers to my questions. And, yes I'll keep that in mind so that I'll avoid confusion on my future posts. I'm glad I joined myfico, taught me a lot. Big help for us beginners.

[SouthJamaica]

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@Anonymous wrote:

South Jamaica---  just wanted to ask, looking at your siggy,   do you actually use all of those cards each month to keep them active ?  or how do you manage that many cards ??

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Yes I use each card every month.

I keep a list and rotate through.