MyFico score of 643, couple of questions

[Scrne011]

Hello, first post here, hoping I can get some input on some general questions I have.  While I've had credit for a couple years I've just recently decided to look into what my score is and pay attention to it.

I'm 21 years old and myFico score is 643.  Is this a decent score for someone my age?  I know credit scores probably vary a lot for any age, but I can't tell if I'm starting out from a below average score, or a normal one.  According to myFico score summary, the biggest thing hurting my credit score seems to be a short credit history.  My oldest account was opened a little over 2 years ago in the form of a federal student loan.  My oldest revolving account was opened a little less than a year ago.  This was a Kohl's card with a $300 spending limit that the cashier kind of tricked me into getting.  Couple months later I applied for and got a Capital One MasterCard with a $500 spending limit.  This has recently gone up to a $750 spending limit, making my total revolving credit limit at $1050.  I've also used "heavy use of your available revolving credit" as of the 11th, I was at 47% of my credit limits.  I have since paid off all of that and I plan on using my capital one card for daily purchases and paying most of it off each pay cycle.  I've also had 4 inquiries in the past year from the cards I mentioned, Comcast, and a car loan I haven't yet taken.

Helping my score is no missed payments on my credit accounts and recent use of credit cards.  SO a couple more questions:

At what time frame does my length of credit history not become the biggest factor negatively affecting my credit score?  How many years can I expect until my length of credit history starts helping my credit score?  Or at least doesn't negatively effect it as much?

The inquires on my credit report seem to "disappear" after a year.  But do they continue to take the same affect on my score for the entire year before they go away, or do they effect my score less, and less each month that passes?

I hardly ever use my Kohl's card.  Every once in a while I'll decide I need a new pair of jeans or something and I'll go to Kohl's for the discount I get if it's convenient.  Then I'll just pay it off before the end of the month (it has a horrible interest rate).  Is this low use hurting my credit score?

Should I ask Capital One to increase my limit on my credit card?  Or is that pointless?  The way I see it, a higher spending limit makes my percent of revolving credit in a lower range.

I've been considering putting my little brother (17yr old) as an authorized user on my Capital One card.  Is there negative effects for either of us if I do this?  I want to help him build credit so by the time he gets his own card or loan or whatever, it will be at a good rate.  I understand that means if I miss payments that will affect him too, but I'm organized enough that I don't see myself doing this.  I probably won't give him his own card though.  Good idea or bad?

[guiness56]

Welcome to the forums.

Don't know if you are aware of it but you actually have 3 different FICO scores.  One from TU, one from EQ and one from EX.  You can get TU and EQ on myFICO but EX hasn't sold theirs to the consumer since Feb 2009. 

Each score varies from each CRA due to what may or may not be one the reports.  Not all creditors report to all of the CRAs.

There are different factors in a FICO score: 35% for payment history, 30% for amounts owed, 15% for length of history, 10% new credit and 10% for types of credit used.

Your utilization at 47% is pretty high for an optimal score.  For best scoring have all but one report 0, the other report 9% or below.  To do this you need to know when your CC reports to the CRAs.  FICO has no memory and is a snapshot of what is on your report on any given day.  If you were 47% this month and next month your at 10%, that is what you are scored on.  Don't let all of your cards report a 0 balance.  FICO likes to see you use your credit but wisely.

Inquiries are either Hard Pull, which everyone can see, and stay on your report for 2 years but only count against you for 1.  Soft pulls don't count against your score, only you can see them and stay for one year.

Being an AU can be good or bad.  As long as the card is in good standing, has a longer history than his and carries a low balance it will help.  Whatever you do with the card will reflect on his score.

Getting an installment TL will also help your score.

[jamie123]

Well, first off a 643 is not that great of a score. You want to be above 700 and preferably above 720.

The reasons your score is low:

1. High credit utilization. The lenders only report to the CRAs once a month, anywhere from the statement date to 3 to 4 days after the statement date. At that time you want to only have 1 card report a balance of from 1% to 9% of its credit line. All other cards should report zero for the month.

2. More than one card is reporting a balance. You get nicked a bit for every card more than 1 that reports a balance every month.

3. When you have "new" credit on your report it hurts your score a bit. Once the new credit is 6 months old it stops affecting your score negatively and starts to help your score. Some lenders consider credit to be new if it is less than 1 year old.

4. Inquiries will nick your score for 1 year. For each inquiry less than one year old you get nicked a bit more. Inquiries will stay on your report for 2 years but will stop affecting your score after 1 year.

This is what I would suggest you do:

Use your credit cards as much as you want but make sure to pay one to zero before it's statement date each month. Let the other card report a small balance each month of somewhere between 1% to 9%. This means you will have to make 2 payments per month on that card. A few days before the statement date pay the balance down, wait for the lender to report that balance to the CRAs, then go back and pay it down to zero.

It is good to use your credit cards. You won't raise your score unless you show at least some minor activity on them. It is okay to only use your Khol's card occasionally, that is quite alright.

Capital One is a starter card and probably won't increase your credit line so save the effort.

After both your credit cards are 1 year old, this is what you need to do. Apply for 1 card from 2 of these PRIME banks. These banks are prime banks because they will grow with you for life. They are the lenders that will give you 10K credit lines in the future as long as you demonstrate good credit behavior. These are the banks:

AMEX

Bank of America

Chase

Citi Bank

Discover

Wells Fargo

Make sure to stop back here and ask for advice as to EXACTLY which cards you should apply for at that time. There are different lending standards and credit scores and history required for approval for each card. We can advise you better at that time.

It seems your utilization is one of the biggest things affecting your score right now. That is a good thing! As soon as you pay your balance down your scores will rise.

Oh..About your brother. I would wait until he is 18 and let him get his own Capital One card. They are not going to give him any better rates just because he is an AU on your card.

[Scrne011]

jamie123-

I've had a Bank of America account for 4 years or so.  Would it be safe to say this might be a top choice when applying for a new credit card in a couple months?  Will they look into my past banking activities when considering my worthiness?  I've overdrawn my account several times over the years but not recently, within the past year or so.  I also have my paychecks auto deposited into my Bank of America account.  Or does the fact that I'm a BoA account holder not matter at all?

[jamie123]

It's a tossup. Some people seem to think it helps, others, not so much. I'm in the camp that doesn't think it helps much but would be a good idea for you because Bank of America has some of the best online financial management tools (Free Bill Pay) and you already have accounts there.

Watch those overdrafts! They can come back and bite you!

Also, it is not readily mentioned. One of the questions the better lenders will ask you when you apply for credit cards is, "Do you have a savings account?" If you don't already have one, open one.  You should be saving a bit of money every month anyway. It doesn't have to be much.

The reason I am advising you to wait to apply for any additional credit cards is that prime banks look not only at scores but also history. Most prime banks want you to have a score of at least 680 and at least 1 year of proven good credit behavior managing 2 credit cards. They also don't like you to have any other credit inquiries in the past year.

From here on out, I mean for the rest of your life, you should only get credit cards from the prime banks. If you get the 2 cards in a few months, you should then call and ask for credit line increases every 6 months. They will give them to you as long as you have been demonstrating good credit behavior.

You should add 2 new credit cards every year until you possess 6 to 8 cards with the prime banks. Once you have that, you will be set for life. Just keep calling for credit line increases every 6 months.

Oh...AND ALWAYS PAY ON TIME OR EARLY!!!

[MontegoMack]

I didn't realize that 6-8 prime cards is considered to be ideal. 

I also didn't realize that 2 cards per year is preferred over an app spree. 

Interesting advice.

[credit_wise]

643 wouldn't be in the upper echelon but you are still in a better position than millions who are in a much lower bracket these days. Ideally you should try to improve your score by at least 100 points. As far as the credit inquiries go, they should be temporary. I was under the impression that they dissappear after a few months but like guiness pointed out they stay for much longer. I will check intot hat.

I think a CLI would help but again you may need to improve your score first. Start making your payments on time and do your best to manage your CL effectively. Missed payments could cause a big dent on your score.

[guiness56]

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@MontegoMack wrote:

I didn't realize that 6-8 prime cards is considered to be ideal. 

I also didn't realize that 2 cards per year is preferred over an app spree. 

Interesting advice.

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It isn't.  How many cards you have is a personal opinion,.  There are those that have reached over 800 scores with no CC.

[jamie123]

Yes, some people have reached over 800 without credit cards but the great majority of people that have scores in the 800s have 6 to 8 credit cards.

The OP is 21 years old. If he follows my advice he will have 6 to 8 credit cards with PRIME banks by the time he is 25 years old. By the time of his 30th birthday he will be golden. He will have 6 to 8 credit cards with prime banks and they will all have at least 5 years of history. His AAoA will be high for the rest of his life. I think that would be an awesome foundation to build the rest of his credit requirements around.

Anybody have better ideas?

[JMills]

If you dont let all your cards show a $0.00 balance, how much balance should be on the card 30%?