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3rd credit card= good idea?

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3rd credit card= good idea?

Good morning,

I am just starting to rebuild my credit.  I currently have two credit cards and an installment loan (see below).  I have heard that it is ideal to have three credit cards for a boost to my score.  My average credit score just went to 570 due to lowering my utilization on the two existing cards.  Should I get another predatory card for the boost, or would it be better to hold off until my score improves enough for a Cap 1 or Discover secured?  My score should slowly climb as AAoA and on time payments increases, but my baddies aren't even close to falling off any time soon, so it may be a very slow climb.

 

94% on time payments (14/15) 1 missed payment this last March

AAoA: 5 months

First Premier (unsecured): $425 limit  $20 balance

OpenSky (secured) $200 limit $25 balance

SelfLender (installment, secured): $500 total $400 balance (cannot pay ahead without decreasing the life of the loan)

 

Badies:

Comenity Bank: Pier 1 (OC)= "Closed" acct DOFD Aug 2017 $468
Portfolio Recovery Associates= "Collection acct" First reported Feb 2018 $517
Credit One Bank (OC)= "Closed. $635 written off" DOFD Apr 2017 $635
Resurgent/LVNV Funding= "Collection acct" First reported Nov 2017 $ 635
Fingerhut (OC)= "Closed. $981 written off" DOFD Jul 2017 $981
Jefferson Capitol= "Collecion acct" First reported Jan 2018 $981
First Premier (OC)= "Paid, closed. $431 written off" DOFD Jun 2017 $431
Helvey & Associates= "Collection acct" First reported Oct 2018 $256
Credit Collection SVCS I= "Collection acct" Opened Mar 2019 $317
Credit Management= "Collection acct" First report May 2016 $400

 

 

Starting Scores (8/8/19)
Message 1 of 9
8 REPLIES 8
Established Member

Re: 3rd credit card= good idea?

Me personally, I'd avoid getting any more predatory cards. Your already paying about $85 in annual fees now? I'd just garden with what you have and focus on not getting any more missed payments. In fact, I'd set up auto pay right now for the minimum payments due.  Maybe in a few months try to pre qual for the disco. I'm only using two cards and so far knock on wood, my score has gone up dramaticly in the three months that I have had them.

 

 

Message 2 of 9
Community Leader
Super Contributor

Re: 3rd credit card= good idea?


@Extra_Credit wrote:

Good morning,

I am just starting to rebuild my credit.  I currently have two credit cards and an installment loan (see below).  I have heard that it is ideal to have three credit cards for a boost to my score.  My average credit score just went to 570 due to lowering my utilization on the two existing cards.  Should I get another predatory card for the boost, or would it be better to hold off until my score improves enough for a Cap 1 or Discover secured?  My score should slowly climb as AAoA and on time payments increases, but my baddies aren't even close to falling off any time soon, so it may be a very slow climb.

 

94% on time payments (14/15) 1 missed payment this last March

AAoA: 5 months

First Premier (unsecured): $425 limit  $20 balance

OpenSky (secured) $200 limit $25 balance

SelfLender (installment, secured): $500 total $400 balance (cannot pay ahead without decreasing the life of the loan)

 

Badies:

Comenity Bank: Pier 1 (OC)= "Closed" acct DOFD Aug 2017 $468
Portfolio Recovery Associates= "Collection acct" First reported Feb 2018 $517
Credit One Bank (OC)= "Closed. $635 written off" DOFD Apr 2017 $635
Resurgent/LVNV Funding= "Collection acct" First reported Nov 2017 $ 635
Fingerhut (OC)= "Closed. $981 written off" DOFD Jul 2017 $981
Jefferson Capitol= "Collecion acct" First reported Jan 2018 $981
First Premier (OC)= "Paid, closed. $431 written off" DOFD Jun 2017 $431
Helvey & Associates= "Collection acct" First reported Oct 2018 $256
Credit Collection SVCS I= "Collection acct" Opened Mar 2019 $317
Credit Management= "Collection acct" First report May 2016 $400

 

 


I think a third card is a good idea but not quite yet. Wait for your scores to improve a bit. 

In the meanwhile, use money you'd put towards deposit to pay some of those collections or charge offs, especially ones that are updating. 

EX 754 EQ 773 TU 752
Message 3 of 9
Valued Contributor

Re: 3rd credit card= good idea?

I would not advise opening any more cards; the two cards and installment loan you currently have is more than sufficient to build your credit.  Instead I would advise on ensuring no more late payments; Payment History accounts for 35% of your FICO score so its imperative not to have late payments.

 

Just having three cards would not increase your scores.  The actual increase comes from following a techique called AZEO or All Zero Except One, where you allow one card to report a small balance to the credit bureaus and the other two to report zero balances.  The credit bureaus penalize your score when either more than 33% or more than 50% of your cards report a balance (the actual threshold varies by credit bureau).  So having three cards avoids this "too many credit cards with balances" penalty since with only one card showing a balance, you are not exceeding the 33% of your cards with balances threshold.





Message 4 of 9

Re: 3rd credit card= good idea?

Thank you for the quick responses.  I've heard people talk about AZEO, but I've also heard you should use every card every month to ensure they appear active.  Are you saying it is worse to have both cards under 10% than having one card under 10% and the other at $0?  Should I still use the $0 balance card, but pay it back down to $0 a week before statement/report date, or just not use it at all?

Starting Scores (8/8/19)
Message 5 of 9
Valued Contributor

Re: 3rd credit card= good idea?


@Extra_Credit wrote:

Thank you for the quick responses.  I've heard people talk about AZEO, but I've also heard you should use every card every month to ensure they appear active.  Are you saying it is worse to have both cards under 10% than having one card under 10% and the other at $0?  Should I still use the $0 balance card, but pay it back down to $0 a week before statement/report date, or just not use it at all?



You do not have to use every credit card you have every month.

 

Your FICO scores are maximized when you have one card reporting a balance at less than 9% of its credit limit, and the others reporting zero.  It does not matter how you get there.  You can use all your cards, if you so choose, they pay them off before they report to the credit bureaus, ensuring that only one reports a small balance.

 

Given the baddies on your credit report I'm not convince that implement AZEO would make an appreciable difference anyway.





Message 6 of 9

Re: 3rd credit card= good idea?

Okay, thank you.  I'll give AZEO a try while working on hopefully getting some of the collections removed.

Starting Scores (8/8/19)
Message 7 of 9
Valued Contributor

Re: 3rd credit card= good idea?

Good plan above. Hold off on apping. Maintain the cards you have and ficus on those derogs - until they’re cut way down, any score gains will be incremental. That Portfolio collection is low hanging fruit. Settle it for as little as you can and once paid, they’ll delete themselves from your reports. It’ll be like they never were there. Try to negotiate PFDs for as many derogs as you can, as clearing them off helps more than just paying them and having them remain on your account as “paid in full”.


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Entering the garden 5/27/2019, staying until 2020
Message 8 of 9

Re: 3rd credit card= good idea?

Thank you.  I'll start with Portfolio collection this paycheck.  It will be niceto see these start falling off.

Starting Scores (8/8/19)
Message 9 of 9
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