Paying off...

[Anonymous]

Seems like great advice in this thread.

Fascinating... 4 open credit card accounts is optimal for mortgage FICO models?

If someone plans on applying for a mortgage fairly soon, and has three accounts, would you advise him or her to open a fourth?

[Anonymous]

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@Anonymous wrote:

Seems like great advice in this thread.

Fascinating... 4 open credit card accounts is optimal for mortgage FICO models?

If someone plans on applying for a mortgage fairly soon, and has three accounts, would you advise him or her to open a fourth?

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I wouldn't say that four CCs are optimal.  That would mean that four is a bit better than five.  "At least four" is closer to the mark, which allows for eight cards being just as good as four.

Maybe the truth is "at least three" -- or maybe you need at least five to get the absolute best result (e.g. four $0 balances).  Knowing for sure is hard because the folks here are trying to backwards engineer a hidden proprietary algorithm.  Also because there many different scorecards a person could be in.

Regarding your question in green, no I would most certainly not advise him to open a fourth card.  That's because whatever advantages might exist for four cards over three, you would lose those in contrast to the short term harm done by opening a new card.  Remember that the context of your question is that the person plans to close on a house soon. 

In our OP's case, she is being advised against reducing her cards from eight (say) to 2 or 1.  To keep an existing card open doesn't involve the score hit that opening a new card does.

[Anonymous]

PS to Sarek:

I was the only guy in the pizza joint that I play trivia at who know the answer to "What was the name of Spock's mother?"  His dad is hard but his mother is even harder.  :-)

[SouthJamaica]

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@Anonymous wrote:

His reasoning is that 1. his credit is better than mine and we are hoping to buy a houe 2. I tend to spend so not having the option would help.  He has stated that yes my score would drop but we can deal with that as it comes ... he is afraid of the monthly/yearly fees associated with some of the accounts.  (again not great credit score so I got the "started" cards. 

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1. If you have a card with monthly fees, pay it down to zero and close it... immediately. Don't even think twice. That is complete junk.

2. As to the other cards, you need to tread carefully.

3. Do not under any circumstances give up all your personal credit and do not get any joint credit cards.

4. IMHO you should not buy a house together until you are married.

[Anonymous]

Thanks for the clear explanation.

Your remark about different "scorecards" reminded me of a question that I've been meaning to ask on these forums for a while, and which might also be relevant to the original poster's situation.

FICO scores sometimes come with a remark about "too few accounts in good standing" or some such... I've seen this remark even with a large number of accounts but also some derogatory ones, which to me suggest that this element of the algorithm looks at the number of good accounts vs the number with a history of delinquency.

Does anyone this to be true (or untrue)?

What it suggests is that if someone does have some derogatory accounts, the optimal number of accounts might be substantially higher than for someone with a thin but clean file.

What is still unclear to me is whether there is a difference between open and closed accounts as far as this goes... any thoughts?

[Anonymous]

If you don't get a response from Thomas Thumb, ping him to hear what he has to say about it.