My Credit Plan

[Anonymous]

I've made a few posts on this forum but I haven't been able to log in due to some glitch so I started this new account.

My Equifax credit score is now 736. First of all are there any benefits to improving my score such as lower interest rates on loans, etc.?

My plan to increase the score is based on the negatives mentioned on my report:

Average account age is short
Time since most recent account opening is short
Relatively high number of consumer finance company accounts
High number of accounts with balances

Of my open accounts, I have 7 student loans and a credit card I haven't used. My plan is as follows:

Open one credit card now. I am going to purchase a property within the next couple months, so I'll wait until the deal is closed and interest rates locked in etc., then open at least 5 additional no annual fee credit cards. I'll then have 7 total credit cards to balance out my 7 student loans. I plan to keep these open indefinitely to improve my average account age in the long run, as right now my oldest account is a credit card which I closed 4 years ago before I knew how credit scores worked and all my other accounts will eventually get closed (student loans, car payment, etc). After I open these 5 credit cards and get a mortgage, I don't plan on any transactions for several years so the time since my most recent account opening will improve. Opening more credit card accounts will also take care of the last 2 points on my credit report, the relatively high # of consumer finance company accounts and high number of accounts with balances, as I think both of these will get diluted with more total accounts. I plan on only using 1-2 of my credit cards.

Is this plan reasonable? Many thanks for any comments/advice!

[Anonymous]

Pilotx - I would say your EQ score is good.  Do you know what your EX or TU FICO scores are?

Before you start opening up alot of accounts, I would try for quality, rather than quantity.   2 or 3 rather than 5 is preferable in my opinion.   You should try for cards with higher limits, rather than more cards with lower balances.

Why so many consumer finance accounts?  Does this have anything to do with your 7 student loans?   Why so many?

You need age more than anything else, and that will take time.    Remember than new credit inquries and accounts will temporarily ding your scores, so you don't want to go crazy with new credit applications.

Also, start using that credit card immediately, but keep the utilization % as low as possible.  But you need to use this card.

I am sure others will post their comments and recommendations.

[Anonymous]

My credit report is mainly student loans, so I'm assuming they are considered "consumer finance company accounts," even though they probably shouldn't be. I took out ~2/year because you can only take out so much subsidized loan from the government and then you have to take out a 2nd unsubsidized.

If I have too many of these and high balances, wouldn't it be more helped by quantity of credit cards and not quality? If I had 3 credit cards and 7 of these, it seems to me they might consider that ratio pretty similar and I would still have too many consumer finance company accounts. I'm not concerned about a temporary dinging of my score because I will do all of this after I purchase a property and I don't foresee any new deals soon.

For the "High number of accounts with balances," it seems to me that they are looking at a relative number of accounts, eg, from the post below

http://ficoforums.myfico.com/fico/board/message?board.id=ficoscoring&message.id=24029

there is someone with 9 accounts with balances who received no negative message, but the person with 6 accounts with balances had too many so this would seem to suggest that I increase my total number of accounts.

I will also read on and work on my utilization. Thanks for the input.

[Anonymous]

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@Anonymous wrote:
My Equifax credit score is now 736. First of all are there any benefits to improving my score such as lower interest rates on loans, etc.?

Is this plan reasonable? Many thanks for any comments/advice!

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I've seen the mortgage experts say the best rates can be had at 720+. Elsewhere I see 760+ (bankrate, etc) so I suppose it wouldn't hurt to be a tad bit higher. Though from what I understand the middle score is used so check your other two scores before scrambling. Equifax is my lowest at 752. My others are at 769 and 782 so I figured all I have to do is keep them in that range long enough. I think I've heard 740 gets top rates for auto loans.

That being said obviously they look at things beside scores so make sure everything's in order financially speaking..income and employment history, DTI and that stuff for a mortgage.

Do you really want 7 cards? I wonder if 7 will help much more than 2 or 3. Assuming the limits of the 2 or 3 are decent. To use each card every couple of months to keep them active seems like a lot to keep track of for a few extra points. Time will help with 2 of the 4 recommendations and I don't think you can force them along.

Any plans to consolidate the loans? I suspect it would help with the too many accounts issue and perhaps the consumer finance issue. Not to mention making life a little easier perhaps..

[Anonymous]

At 736, you're approaching the asymptote of the FICO score vs. interest rate curve. Going up another 30 points might get you a 0.3% to 0.5% break on interest. Going from 700 to 730 was probably worth three-quarters of a point, and going from 670 to 700 was probably worth 1.5% or so.