Not sure what to do next?

[Anonymous]

I have been reading myFico for a couple weeks now and it has been really interesting and informative. I am just trying to figure out what to do next. These are my current accounts:

Credit cards:

Citi AAdvantage Bronze MC - $5,300 limit (opened in 2007 - oldest account)
Discover It - $6,500 (opened in 9/2014)
Amex BCP - $10,300 limit (opened in 10/2014)
CapitalOne Quicksilver - $10,000 limit (opened in 10/2014)

Store cards:
Kohl's - $1,000 limit (opened 2012) 
Victoria's Secret - $750 limit (opened in 10/2014)

Car loans/other

1 car loan (1.9% for 36 months) - about $5500 left of $16k, one year left on loan

2nd car loan (joint with husband - 1.74% for 67 months) - about $16k left of $18k, 5 years left on loan

$500 credit line opened at our credit union - never used. Opened in January 2014

As far as my credit scores, Credit Karma currently shows 713, Discover shows 758, CapOne shows 713, and Mint shows 730. These will likely all change because none of the new cards, including Discover It, have reported yet. Citi also hasn't reported since my last bill - 36% utilization (I pay it all off monthly but never new to pay it off before the statement cut). So, paying it off plus the new credit lines should change things. What should be my next move?

Also, my husband's credit is around 634. When I signed him up for CK a collections account showed up, that he had never been notified about - Pinnacle Financial, who bought the account from Verizon. What do we do about that? Like I said, he was never notified by Verizon or Pinnacle - and based on the date on CK, it was sold to Pinnacle while he was deployed last year. He has been back for almost a year now though. I have honestly never dealt with collections so I don't know what to do? He is an AU on my Citi account and just got a CapOne Platinum card with a $300 limit. Other than that, the only other credit history he has is the joint car loan. 

Any advice on any of this, or anything else, would be appreciated!

[takeshi74]

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@Anonymous wrote:

What should be my next move?

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What are you trying to accomplish?  With several new accounts it's really just a matter of reponsible usage and maintenance IMO.

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@Anonymous wrote:

Also, my husband's credit is around 634. When I signed him up for CK a collections account showed up, that he had never been notified about - Pinnacle Financial, who bought the account from Verizon. What do we do about that?

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I can't really comment on this.  You might want to look in the Rebuilding subforum.

[Anonymous]

I just want to improve my credit score as much as I can, while maximizing the rewards I can get. I am prequalified for the Chase Freedom, and kind of interested in that card, as it would offer some nice 5% categories (especially the restaurants one, since I don't have a card that gives restaurant cash back year round and we eat out a lot), but I am not sure if I should wait for some of the newer accounts to show up? I am also trying to decide if it will help or hurt to pay off my car loan - I have the money to do it, and it would be paid off a year early. That way we could focus on paying off my husband's loan, since it is much longer.

Thanks for any help you can give - I appreciate it!

[CreditDunce]

You:

When you open new trade lines (CC, auto loans, etc), your credit score typically takes a small hit.  Your score is hit at first with the new INQ/HP(hard pull).  Then secondly when the new trade line reports, your Average Age of Accounts decreases.   The rule of thumb is it takes 6 months for your scores to recover.  But it really depends on how many accounts your open and how low your AAoA goes.

Therefore, if you want the freedom, you should app for it soon.  Just realize that it will also hurt your score in the short term.  By the way, of the scores listed, only the Discover TU-08 score is real.  The others are not FICO scores and can be ignored.

As the other poster said, to increase your score, all you need to do now is pay your bills on time.  Pay in full each month because it is the best financially.   Your scores will increase overtime by themselves.  It is not complicated. 

If paying the auto loan early will save you money, then do it.   I would make sure I have an adequate emergency fund before doing so.  

Note that the auto loan is probably helping your credit score.  Having a couple open installment loans is considered a good thing by FICO.   However, as long as you have at least one installment loan on your credit report, you will be fine.  If you are thinking about a mortgage,  you might want to add a small shared secured installment loan at least 6 months before applying for the mortgage, but that would be optional.  And only if you only had one open installment loan.

Husband:

Your husband will probably want to wait 6 at least 6 months to give his new Cap1 card time to establish his revolving credit history.  At which point he should apply for 2-3 additional credit cards.  FICO likes to see at least 3 CC's on your credit report.   He could open a secured CC now if he was impatient to build good credit history.   BoA is known to graduate secured CC's to unsecured CC's in a year.  However, I would address the CO first.

Collection agencies are not required to notify you about a collection.  If you owe the money it is your responsibility to make sure it gets paid.  At some point, they will probably contact you about paying it.  You may want to read more in the rebuilding section on the best ways to ask for Pay For Delete (PFD).  For small amounts, that is the best way to resolve the issue.

He is also a good candidate for a share secured loan.  It will not erase the negative CO, but it will help him build a second positive trade line.  Unlike a secured CC, you get the money you use to secure the loan immediately back.   Check with your credit union if they offer a shared secured installment loan.

There are several other threads you (or him) can read on how to start building credit history.  There are also a couple of threads on how the shared secured installment loans work.

[Anonymous]

Thanks for the advice! I went ahead and applied for the Freedom and was approved with a $6000 limit. Not as high as some of my others, but, still higher than my oldest card. That's good to know the Discover score is a "real" score - I know the others are not but I just use them for trends.

As far as paying my bills on time - I don't ever carry balances and have 100% on time payments, so, I will keep doing what I have been doing.

I will take a look at my auto loan and try to decide if it is worth paying off early. If I pay it off early, I assume my AAoA will take a hit? Because once all the new accounts report, my AAoA will be under 2 years, where as the car loan is 2+ years? Is that enough of a reason to keep it open?

Thanks for the input on my husband's situation. We will let the Capital One account age some, and work on getting a PFD, though from what I read, that is unlikely with this collection agency.

I appreciate all the help!

[jamie123]

You received some really great advice from CreditDunce!

I would see how your scores shake out once all these new accounts start reporting before doing anything about your auto loan. Your auto loan is helping your scores right now and you will need all the help you can get in a month or two. Credit Dunce is being nice in telling you that your scores will drop a bit. With all those new accounts your scores will drop A LOT!

Don't worry though, if you keep paying your bills on time your scores will recover in 6 months to a year and actually climb higher. It is the price we all have to pay to build thick credit reports and strong scores.

Your husband MUST get that collection off his reports or it will be a drag on his scores for 7 years. Once the collection is off his reports his scores will climb high enough for him to start apping for cards.

Credit cards are the building blocks of rock solid credit scores. You want to end up with 5 to 8 credit cards that you can keep open for life. It is usually always a bad idea to voluntarily close a credit card account. They will keep your AAoA high as you apply for other new credit throughout your lifetime like auto loans and mortgages.

[CreditDunce]

If you are looking at CreditKarma's AAoA calculation, it only includes open accounts.  However, FICO includes open and closed accounts in AAoA.  If you pay off the auto loan it will stay on your credit report and help your AAoA for about 7-10 years.   It should stay on your credit report for 10 years, but I did have one CRA drop off a positive TL after 7 years.

FICO loves for you to have a mix of open installment and revolving credit lines.  Paying off your only installment loan will hurt your credit score.  But since you have the joint auto loan, paying it off early will not hurt your scores much.   There may be some advantageous to having two open installment loans on your credit report.  But if there is, it is a small plus.   It is a good idea to have two open and aged installment loans if you will be applying for a mortgage, but otherwise not worth it.  Just pay your bills and your credit score will take care of itself.

I am recommending your husband get the secured installment loan because his AAoA is basically 0.   The more accounts he can start with, the better.  The CO will limit how high is credit score will go, but starting with two installment loans is a good base to work from.  I wish I could offer more advice on the CO.  However, I do not have any experience with rebuilding.  The people who hang out in the rebuilding forums will probably be a much better resource.

PS Congratulations on being approved for the Freedom.  There is some category overlap with Discover.  But it is still a great card to have.  It will also help you build a relationship with Chase.  Now you just need to sit back and let your scores recover.