New card to raise score?

[Anonymous]

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@Anonymous wrote:

I assume that when you say you're in the market for a new vehicle, you're considering taking out an auto loan.  Your scores are a bit less than ideal for that and the last thing you want to do before a loan app is apply for revolving credit.  For one, it's just not a good look and two, the new account will likely lower your score a bit more, possibly making the interest rate you would obtain for the loan worse.

Adding a credit card to your profile if you have 0-2 cards currently is something that can positively impact your score in time, but it's not something that is likely to help you immediately.  If you already have 3+ cards, adding another wouldn't be beneficial in most cases for what you're looking to achieve.

A bit more information that the previous replies have asked for would be helpful though to give you the best advice.

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Thank you for that. I make ~$6500 per month. I have two low limit cards ($300/400) which I use but immediately pay down to retain a low balance. I rent currently but do have an auto loan (never late) at $850 per month.

[Anonymous]

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@SouthJamaica wrote:

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@Anonymous wrote:

I'm in the market for a new vehicle. I'd like to bring my score up a little more and Equifax's portal is telling me that if I get a new credit card that my score could go up a bit, depending on the limit. Is this true? I've read on here and elsewhere that a new card can bring my score down a little, so I'm not certain.

I'll post my scores below. I'm new here and don't know how to add them to my signature.

EX: 672

EQ: 637

TU: 611

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No it's not true. It's much more likely to cost you points than gain points.

The best thing to do prior to making a big credit purchase is to make no new credit applications. Period.

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Thank you for that.

[Anonymous]

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@Anonymous wrote:

It is actually feasible that getting a 3rd card may boost your scores slightly -- when did you report your newest account of any kind?  Recently?

The most important thing you can do first, before applying for any card, is to pay one of your credit cards to $0 so it reports that to the bureaus, and pay the other card down to $5 at statement cut so it reports $5 to the bureaus.  Then pull your FICO 8 scores and see what you see.  If your scores go way up, I wouldn't see a reason not to snag a third card that you have just to hit the magic FICO 3 card happy place.

With scores that low you might have some derogatory information on your reports (late payments, collections, etc) -- I'd highly suggest beating those off your report first as it'll have a great effect on your new loan interest rate.

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Thank you for that info. My one card I've had for years, the other is about six months old. I always keep my card balances in the 1% range. What are the benefits of paying one off completely? I do have a child support collection that shall not go away for some time. I was under the impression that this could be why my score is taking a while to climb.

[Anonymous]

Do you use any credit monitoring service where you get access to your reports?  A couple of free ones worth signing up for are Credit Karma and WalletHub.  What you want to do is see what balance is currently reported on your two small limit credit cards.  You said that you make small purchases and pay them off immediately.  This would suggest that you likely have $0 balances reported on both of your revolvers, which for scoring purposes isn't a good thing.  You'll be able to see the reported balances using either of the credit monitoring services referenced above.  What you'll want to do is make a small purchase, say $5-$10 on either of them and don't pay it off immediately.  Let that balance report (you'll see it show up using the credit monitoring service) and your credit scores will rise.  How much is questionable... could be a little, could be a good chunk.  Utilization makes up 30% of your score, so you definitely want to maximize that.

[Anonymous]

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@Anonymous wrote:

Do you use any credit monitoring service where you get access to your reports?  A couple of free ones worth signing up for are Credit Karma and WalletHub.  What you want to do is see what balance is currently reported on your two small limit credit cards.  You said that you make small purchases and pay them off immediately.  This would suggest that you likely have $0 balances reported on both of your revolvers, which for scoring purposes isn't a good thing.  You'll be able to see the reported balances using either of the credit monitoring services referenced above.  What you'll want to do is make a small purchase, say $5-$10 on either of them and don't pay it off immediately.  Let that balance report (you'll see it show up using the credit monitoring service) and your credit scores will rise.  How much is questionable... could be a little, could be a good chunk.  Utilization makes up 30% of your score, so you definitely want to maximize that.

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I misspoke when I said that I pay them off. I pay them down to one percent each; $3 for one and $4 for the other, literally. I monitor my reports via my account with Equifax. It was one of their calculators which suggested I keep the cards at 1% for the biggest benefit. However, It was also one of their calculators what tells me I would see a drastic score increase with the addition of the third card- the higher the limit, the better. But, I am seeing now that a new application or even account opening could be detrimental. I will be financing through Navy Federal Credit Union, which should help as far a approval and interest rate, but I need to make sure that I have all of my ducks in a row. The truck I have now, comparable in cost to the one I'm considering, I obtained two years ago with my scores all around 525. I am a disabled Marine and the new truck is more comfortable and easier on me. I don't want there to be any reason why I'd be denied for this one [which I feel I need as my health continues to deteriorate]. I already pay through the roof on the current truck ($850 per month) and have an 8.99% interest rate. Navy Federal would have me at about 2.99. That alone gives me confidence.

[Anonymous]

FICO prefers to see balances reported on less than 1 out of 3 cards.  With only 2 cards, you can't maximize this but try to only show balance on ONE card, not both.

To not get penalized by FICO for "too many cards with balance", you actually can't let 2 cards report a balance until you have 7 total credit cards reporting!  So anywhere from 1-6 cards, only let a balance report on one.

[Anonymous]

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@Anonymous wrote:

FICO prefers to see balances reported on less than 1 out of 3 cards.  With only 2 cards, you can't maximize this but try to only show balance on ONE card, not both.

To not get penalized by FICO for "too many cards with balance", you actually can't let 2 cards report a balance until you have 7 total credit cards reporting!  So anywhere from 1-6 cards, only let a balance report on one.

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Thank you! I had no idea. I'll be sure to take advantage of that.

[Anonymous]

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@Anonymous wrote:

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I misspoke when I said that I pay them off. I pay them down to one percent each; $3 for one and $4 for the other, literally. I monitor my reports via my account with Equifax. It was one of their calculators which suggested I keep the cards at 1% for the biggest benefit. However, It was also one of their calculators what tells me I would see a drastic score increase with the addition of the third card- the higher the limit, the better.

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Credit limits have zero impact on scoring.  Utilization has a scoring impact, which of course can be influenced by greater credit limits.  This is a non-factor for you though, as you have 1% utilization already.  Adding a 3rd card to your file, whether a $500 limit or a $30,000 limit would not matter at all with respect to scoring in terms of the limit of that card.

Definitely allow 1 of your 2 cards to report a $0 balance.  The scoring benefit you see from going from 100% of your cards reporting balances to 50% of your cards reporting balances IMO would be greater than if you went from 50% to 33%, which is what would happen if you implemented AZEO following the addition of a 3rd card.  On my profile, going from AZEO to 50% of cards with balances reported only resulted in a 5 point ding on TU.  This was going from 1 of 6 cards with a balance reported to 3 of 6.  If I were in your shoes, then, adding a 3rd card in the long term would probably be worth about 5 points; Insignificant in my book.  I say long term, because initially adding the card would likely result in a > 5 point drop between the inquiry, new accounts and potential age of accounts reductions. 

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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I misspoke when I said that I pay them off. I pay them down to one percent each; $3 for one and $4 for the other, literally. I monitor my reports via my account with Equifax. It was one of their calculators which suggested I keep the cards at 1% for the biggest benefit. However, It was also one of their calculators what tells me I would see a drastic score increase with the addition of the third card- the higher the limit, the better.

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Credit limits have zero impact on scoring.  Utilization has a scoring impact, which of course can be influenced by greater credit limits.  This is a non-factor for you though, as you have 1% utilization already.  Adding a 3rd card to your file, whether a $500 limit or a $30,000 limit would not matter at all with respect to scoring in terms of the limit of that card.

Definitely allow 1 of your 2 cards to report a $0 balance.  The scoring benefit you see from going from 100% of your cards reporting balances to 50% of your cards reporting balances IMO would be greater than if you went from 50% to 33%, which is what would happen if you implemented AZEO following the addition of a 3rd card.  On my profile, going from AZEO to 50% of cards with balances reported only resulted in a 5 point ding on TU.  This was going from 1 of 6 cards with a balance reported to 3 of 6.  If I were in your shoes, then, adding a 3rd card in the long term would probably be worth about 5 points; Insignificant in my book.  I say long term, because initially adding the card would likely result in a > 5 point drop between the inquiry, new accounts and potential age of accounts reductions. 

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That's a great explanation. I appreciate you speeling it all out for me.