How do you maximize your credit limits?

[Anonymous]

Greetings--

I'm one of those people that spends more time in the stock market and doesn't generally need to borrow, so I didn't really pay much attention to my credit report & score.  Rather than give you my complete history, here's the current status:

Goal: I would like to be able to get signature loans or lines of credit in the $20k-$50k range.  I'm starting a new business and woud like that cushion.

Score: 650 across the board.

3 credit cards, $9,000 credit limit, Util is high at the moment but I can make them all zero easily.

There is a mistaken derog, and a 2 year old 30 day late (which was due to an error) and I'm pretty clear about how to clear these up.

Average age is 5 years, but this is in part due to one 6+ year old closed credit card.  Will it be dropped  at 7 years after it was closed?

The "advice" on my score says: 

6. You do not have any real estate loans

You do not have any real estate loans. Lenders recognize that obtaining and maintaining a real estate loan requires more skill and discipline than other account types. People who have real estate loans and pay them on time see an increase in their credit worthiness

But the problem is, I don't NEED any real estate loans.   

I'm guessing it would be better to apply for credit limit increases on the three cards I have? This avoids the effect on AAoA and other drawbacks of new tradelines.

My real goal is to be "rated" as a worthy risk for fairly large unsecured loans or lines of credit-- in the $10k-$50k range.   Is this determined by score, or by your current credit limit?  (or some combination)

Does the highest recorded balance have an affect on this ? IF I have a card with a $2k limit, but its max balance was $1k, is that worse than having maxed it out at $2k at some point and let it report there (assuming in both cases that card is now in the %1 utilization range.)

Thanks for any advice!

[Anonymous]

Just Get that revolving debt below 10% on your scores will improve dramatically. There is no need to for a Mortgage while it looks nice on your credit report if its not in the cards its just not in the cards no need to go out and secure a mortgage just for the sake of having a mortgage for points. The lender will not only look at your score but really dive into your credit report and see what kind of risk you really are. The only thing I can see is that you dont seem to have any installment loans at all, so if you have been thinking or may need a new auto it might be the right time to go out and get a new car on credit, it will help your thin file and give you some positive creidt histoy. The only problems I see is no installment loans and a thin credit file. But many banks will extend you a line of credit with a thin file like yours if you have at least 700s. Beleive it or not it might be easier for somebody with installment loans of some sort and lower scores to secure a loan because they have established trade lines and history or repayment.

[Anonymous]

Ok, so once derogs are gone, and utilization is down to %1, and %66 of the cards are showing a zero balance each month, what can I do then?   

That's my real question.

Seems like the next step would be to increase the credit limits on the cards (now that the util is low and my score is high)... but this would cause an inquiry to appear on the report (right now there are only 1 inqs, and its about 6 months old.) 

I could open more accounts- either revolving or line-of-credit, but that would affed AAoA.

On the other hand, if dropping util and getting rid of the derogs puts me at 675-700, would it be possible to open a line of credit then?

I have a lot of financial resources, but not a lot of credit.  I'd like to deploy those resources to improve my credit rating rapidly so that I can start using the leverage of credit instead of tying up resources in the future.   Buying a $100,000 hous is pretty easy because the house is collatoral-- but signature loans are un backed, and I expect the rules are different.

[Anonymous]

You need some sort of Installment loan to have not such a thin file. I mean the next best thing to a mortgage is a auto loan.

[Anonymous]

Well, I can open a 5 year, $5,000 installment loan.  I could open four of them, actually (since they'd be secured by CDs.)   Would four of them- more accounts, and thus a thicker credit file, representing the same total credit limit, be better than one $20,000 secured installment loan?  Should be able to do the same thing with credit cards if revolving is better.

Could I get a $20,000 unsecured installment loan with a score of 675?  (I'm guessing not- 675 sounds high to me, because its close to 750, but it probably isnt' really a good score, is it?) 

[llecs]

OP, where did that advice come from (e.g. which service)? I don't think you are looking at FICO scores.

[marty56]

CLs are based more on income.

IMHO taking out personal loans for a business is not a good idea nor is using an asset like a home to secure one either.

[Adalen]

It honestly sounds like a CreditCheck thing.  My CreditCheck (USAA) says the same thing about a lack of a mortgage hurting my score.

ETA: Just checked my CCM and it says the exact same thing.

[Anonymous]

You need to wait until you fix your credit score. You didn't list your util. Assuming the negatives are gone and ideal util, you should be in the 700s. Personally I was in similar situation but used some tools to deepen my file. A bunch of new loans will only serve to hurt your score in short term. Ever had Amex? Also, I got a 400k loc from wells that was secured by my investments there at sub 3% interest. You might want to consider that.

[Anonymous]

Thanks for the responses.

Maybe I need to rephrase my question:  

I can apply for credit limit increases on my credit cards maybe get $5,000 total credit increas....., or I could open a $20,000 installment loan backed by a CD.  Think about that for a second-- I tie up $20,000 in a CD for 5 years, then write a loan against it, I've got the $20,000 back. I could then make a $19,500 payment on that loan, reducing the loan balance down to %5 utilization.  Thus my total credit would immediately jump $20k.  I doubt, even if my score hits 700 in the short term that a CLI on my USAA credit card is going to be $20k. (and a shame USAA doesnt' do automatic CLIs, I was expecting them to.)

Crashem-  What are the tools you used to thicken your file?  I'm not sure how to do this without additional TLs.   Using the score-prediction-calculator, it seems that actually having more TLs would boost my score a tiny bit, but having too many would only reduce it a few points, while having just $5,000 more in total credit would boost it by 20 points.  

Great news on the Wells Fargo Portfolio Line of Credit.  I didn't know things like that existed!  I'll have to look into if there's something similar to that I could use.

In response your posts:

Yes, this is the info I'm getting from the USAA CMS.  Since the service is coming from Experian, does that not mean that the score they're giving me is the real Ex FICO?   Am I being ripped off here? (Seems much better to pay $12 a month than the $20 per score that myFico wants, but maybe there's a better myFico deal I'm not aware of.)

Glad to hear CLs are based on income.  My ability to repay is good because my income is high and my expenses are very low. I've been rather financially responsible for many years-- so I could put more than %50 of my income into investments.

I'm not taking a personal loan to finance a business. I'm being financially prudent, and I think getting into what I want to do with the money isn't really useful, nor appropriate for a forum like this.   Lets just say my goal is to be able to get a $10k-$50k unsecured personal loan at some point in the next several years.

Finally, yes, my particular situation, I need to finish the process of correcting the errors and see where my score is.  I guess I'm really just trying to understand how you thicken a file without opening new accounts, or whether opening new accountis isn't such a downside if the new accounts greatly increase your total credit limit.

For instance, if I opened that $20k Installment Loan I am talking about above, that woud increase my total credit outstanding from $9 max to $29k.  More than a tripling of it. 

Wouldn't tripling the total credit on my report be worth an additional tradeline and a hit to AAoA?