Credit Types

[Anonymous]

Hello everyone,

Let me just start by saying my goal is to steady myself somewhere in the 820s range.  That'll give me some elbow room if something arises.

I had 1 credit card and I've been using it and paying it to 0 every month for the last few years.

Last June 2015, my score was in the 720-730 range.  Fast forward to last month, it was 777.

I went in to see a finanical advisor at BoA for an unrelated matter, and at the end, he suggested I open up another credit card.  He tells me that I need 2 credit cards and a store department card in order to get a good loan in the future.

I'm not entirely confident in what he told me, so I looked it up and I guess he's talking about the types of credit portion of the credit score calculation.

Since then, I opened up 2 bank credit cards, going from 1 to 3, which hit my credit score pretty hard (777 to 719), but that'll go away and I don't need it high at the moment.

The only thing left that troubles me is a diverity in type of credit lines.  The financial advisor said to open a department card, but isn't that just another credit card?  I looked into what type of credit counts is a different type of credit line, and it's things like mortgage loan, auto loan, student loan, and those aren't things I have or have a need for.  I suppose I could just borrow money just to have debt to pay back, but that sounds really dumb because I'll have to pay interest.

Does anyone have any advice for me?  What should I do about diversifying my credit line?  Should I even do it at all?  Is it necessary to get into the 820 range?  Much obliged to anyone who can shed some light on this matter.

[MauiMan85297]

If you don't have an open installment loan you may want to look into a Secured Shared Long loan (with Alliant FCU) whereas you put $500 into a savings account with them and apply for that said loan and you take it out for 60 mos, once you apply for the loan you can send $450 from the savings to that loan and show low utilization-this would improve your score and show as an installment loan (secured).

[SouthJamaica]

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@Anonymous wrote:

Hello everyone,

Let me just start by saying my goal is to steady myself somewhere in the 820s range.  That'll give me some elbow room if something arises.

I had 1 credit card and I've been using it and paying it to 0 every month for the last few years.

Last June 2015, my score was in the 720-730 range.  Fast forward to last month, it was 777.

I went in to see a finanical advisor at BoA for an unrelated matter, and at the end, he suggested I open up another credit card.  He tells me that I need 2 credit cards and a store department card in order to get a good loan in the future.

I'm not entirely confident in what he told me, so I looked it up and I guess he's talking about the types of credit portion of the credit score calculation.

What he told you is simply not so.

Since then, I opened up 2 bank credit cards, going from 1 to 3, which hit my credit score pretty hard (777 to 719), but that'll go away and I don't need it high at the moment.

The only thing left that troubles me is a diver[s]ity in type of credit lines.  The financial advisor said to open a department card, but isn't that just another credit card? 

Yes it is.

I looked into what type of credit counts is a different type of credit line, and it's things like mortgage loan, auto loan, student loan, and those aren't things I have or have a need for. 

Then don't get them. If you want to pick up points in the "credit mix" department, you can do that by opening a $500 secured loan with Alliant Credit Union (first you open a $500+ savings account, then take out the 'share secured loan'. No credit inquiry. Very minimal interest. Take the loan out for 48 months, and either decline -- or drop -- autopay, and pay off 91% of the loan the first month. Then pay $1 a month for the next 48 months).

I suppose I could just borrow money just to have debt to pay back, but that sounds really dumb because I'll have to pay interest.

Does anyone have any advice for me?  What should I do about diversifying my credit line?  Should I even do it at all?  Is it necessary to get into the 820 range?  Much obliged to anyone who can shed some light on this matter.

I don't believe it's necessary but I'm not an expert.

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[Anonymous]

Diversification beyond credit cards isn't necessary to bust through the 800 mark, but without it the process will take longer. And pay attention to SouthJamaica's post. They are spot on.

[Thomas_Thumb]

You can get to 820 without any installment loans in your file - open or closed. However, as SJ mentions, it is a lot easier to get there if you have and maintain an open installment loan with a small balance to loan ratio. A 30 point boost is fairly standard for those that previously had no open loans - if the tactic is executed correctly. The methodology is described here:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

Provided below is a link to a poster, Ubuntu,  that gives personal testimony to having Fico 08 scores well above 820 without an installment loan.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Our-Forums-FICO-High-Achievers-Who-has-at...

[RonM21]

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@Anonymous wrote:

Diversification beyond credit cards isn't necessary to bust through the 800 mark, but without it the process will take longer. And pay attention to SouthJamaica's post. They are spot on.

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+1

[Anonymous]

Many thanks, everyone.  This was the right place to ask.  Thanks for all your help.

[Anonymous]

Your credit mix if a part of your overall score.  I know they would like to see all of the boxes checked but you should do what you feel comfortable doing.  I don't have a student loan and never will.  We have a mortgage, 1 auto loan/lease, & cc's.  We did get a moto loan for 10k just to diveresify and I think that's all we want.  I know a lot get personal loans and put the funds aside and pay it back but I feel it would reflect bad on us.  Looks like we cannot pay our bills and need the money.  Just me.  Everyone has what they believe is best for them.  

[Anonymous]

First of all, welcome. Second of all, is that a myFICO score or a Credit Karma score?

The general advice I've seen preached around here is 3 cards and 1 installment loan.

There's a process on myFICO for taking out an installment loan that will help you boost your score as well (The method SouthJamaica mentions).

As an added FYI, different lenders look for different critiera for lending. Having a 820 overall doens't mean you'll automatically be granted the best of everything.

Take out a credit report and see where your scores are with the other scoring models used. FICO 9 is soon to be the new standard to be used after FICO 8 for cards.Based on that model for example, my score takes a 20 point hit.

It seems like that guy was pushing you on Credit cards to get a commission. Most banks are teaching not just the account managers but the tellers as well to offer credit cards to anyone they serve.