Increasing my secured credit card limit.

[Anonymous]

I have been working on rebuilding my credit for about year now with about a year now without any hiccups. I opened a secured credit card in February or March and have payed on time and kept the balance low (between 100-150) the entire time I've had it. I recently checked my score and its improving.

I did just read some tips that I should maintain it below 10% which I did not know before. I thought keeping it low was good, so I had been, but the 10% tip was something new.

My question is pretty simple actually.

Would it help me, and if so how much, for me to increase my limit on this secured card from 500 to, lets say, 1000 or 1500 or 2000 while still maintaining the balance less than 10% and making my payments on time. Currently, this card is my only revolving credit.

Also, would it be potentially better for me to just open a new card with a 500-2000 dollar limit instead.

I suppose opening the new account would be better in the long run (assuming I also maintained that balance low and continued never missing a payment) but it would  lower my score some at the beginning due to opening a new account and affecting the average age of my accounts.

Any help on this subject would be great. I have no need for the credit at the moment, but obviously would like to strengthen my score over the next 6 months to a year so that I have credit available to me when the time comes.

Thanks.

[llecs]

Welcome!

It doesn't matter the CL. Your score would be the same if you had a 10% balance on a $100 CL or a 10% on $10,000.

Now adding a second would help your mix and you may not even see a drop of you only have one CC now.

[RobertEG]

My advice is to first look at your goals now.

If credit rebuilding is you primary focus, then you have one course to follow.

However, if you have a short term goal of needing to apply for necessary new credit for a car, house, etc. in the near future, that might warrant a different approach.

Credit rebuilding requires, in my opinion, that you have at least two or more revolving lines of credit.  INcreasing the CL, if you have only one curreent revolving line of credit, wont help as much as secrurng an additional line of revolving credit.  You want to get out of being cateforized as a "thin" credit file.  Multiple revolving lines of credit are requried to do this.  Yes, a new card would marginally reduce your credit score now by adding a new inquiry to your CR (which would be gone in a year), and would add a new acct at 0 age in calculation of your AAoA, but neither of those are long term concerns.

IF you are not aplplying for other necessary, major credit within the next year or so, then short term hits on your FICO score are just academic.

It seems, from all you have said, that getting another revolving line of credit is the way to steer your boat.

Tweaking my % revlolving util to under or over 10% is not something that matters at all until you are ready to use your FICO score in the applic for new credit.

Keep it low, but dont worry about any distinctions between 9% or 12%.  Not relevant to credit rebuilding.  Just keep your util below the danger limits of 4/50/60% of more.

[Anonymous]

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@llecs wrote:

Welcome!

It doesn't matter the CL. Your score would be the same if you had a 10% balance on a $100 CL or a 10% on $10,000.

Now adding a second would help your mix and you may not even see a drop of you only have one CC now.

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+1

However, I would recommend only carrying a balance on one of these cards and keeping that one below 10%.  It is better to keep the number of accounts carry any balance at all, below 50%.

[haulingthescoreup]

We may have a terminology issue here, but don't carry a balance on either card. "Carry a balance" means that you don't pay it completely off each month, and that you carry forward some of that balance to the next month, paying interest. There is no reason to give up part of your hard-earned money to banks, which by the way are able to borrow money at 1% or some similarly insanely low figure. They don't need your interest payments.

But for optimum scoring purposes, pay them off or mostly off before they report each month (generally that's the statement date, although it's last business day of the month for HSBC/ Orchard bank cards and US Bank cards), so that one reports $0 and the other reports some token amount, no more than 9% of its CL, and then be sure to pay it off, or you'll get an internal late fee.

If you're not concerned with scoring, you can let both of them report balances and then pay them off in full, but if you allow a large portion of your CL to report, your scores will definitely suffer. However, they can be turned around relatively quickly by paying off early as described above, although it will take a full billing cycle for each card to see the score improvement.

[JasonBourneOfCredit]

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@haulingthescoreup wrote:

We may have a terminology issue here, but don't carry a balance on either card. "Carry a balance" means that you don't pay it completely off each month, and that you carry forward some of that balance to the next month, paying interest. There is no reason to give up part of your hard-earned money to banks, which by the way are able to borrow money at 1% or some similarly insanely low figure. They don't need your interest payments.

But for optimum scoring purposes, pay them off or mostly off before they report each month (generally that's the statement date, although it's last business day of the month for HSBC/ Orchard bank cards and US Bank cards), so that one reports $0 and the other reports some token amount, no more than 9% of its CL, and then be sure to pay it off, or you'll get an internal late fee.

If you're not concerned with scoring, you can let both of them report balances and then pay them off in full, but if you allow a large portion of your CL to report, your scores will definitely suffer. However, they can be turned around relatively quickly by paying off early as described above, although it will take a full billing cycle for each card to see the score improvement.

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You said pay one off so it reports $0. I have a basic question for you. 

I'm concerned about not leaving a balance on my Orchard because it will look like I dont use it to the CRA's.  Should I use it and leave a balance under 9% or PIF and trust that they will see me using it? Goal here is maximum score gain. Thx

[haulingthescoreup]

Although we don't see it on the reports that we can pull, other than on the Experian full report, your usage within the billing cycle is reported, so lenders know that it's being used.

My cards routinely report $0, and it's never been a problem.

If you're worried about it, you can alternate letting each card report each month. It won't be tidy, unless they both update on the same day of the month, so there'll be a brief overlap where either two are reporting or neither, but unless you're going for credit at that very moment, the resulting score hiccup doesn't matter. It will correct itself with the next update.

Your Orchard should report the balance as of the last day of the month, although it might be a week or two before they actually send it in. Same thing with HSBC bank cards (not their store cards) and US Bank cards, although US Bank sends in the info immediately. Almost all other cards will update on the evening of their statement dates, reporting the balance due as it shows on the statement.

If you're not going for more credit right away, you can let them both report, and then pay them off, and not fuss with all this. Just remember that once you're ready to go for a third card (or a loan or whatever) to tweak your reported util by the early payment. It can take a full month or more, depending on your billing cycles, to make this happen, so it's not like you can pull it off in a matter of days in most cases. And remember that Orchard isn't terribly prompt about updating, sometimes even skipping a month for the heck of it.

[RobertEG]

+1

Whether a creditor reports a $0 balance monthly, or some postive balance, the fact is that if you have had activity during the month, the credior will almost invariably issue a new billing statement the next month, and report.current account status, and thus keep the account active in use.

I dont know for a fact, but would speculate that software used by the OC continues monthly reporting unless months of no activity of account usage was shown during mutltple, prior months.  I dont think it is pegged to ending account balance amounts.