More Cards = Better Score?

[magnate]

I only have one credit card. I have a 10k limit and have never paid any finance charges – I always pay the full balance when it is due.

Would it be wise for me to apply for another credit card so that I have a second line of credit? Would that raise my credit score and make it easier to get a mortgage in the future?

[sweeps]

It will likely lower your credit score in the short run. But in general, yes, if you're responsible with both cards your credit score will improve. If you plan on getting a mortgage next month, I wouldn't do it. If you plan on getting one a year or more from now, then go for it.

[poundwise]

I don't disagree with Sweepsplayer's assessment.

I would add a note of caution, however, that the formula "More Cards = Better Score" is certainly not true in and of itself. Is two better than one? Probably. Is 16 better than 10? Probably not. (And for certain purposes, like a mortgage, it could be considerably worse.)

[MarianneJ]

Actually, instead of getting another "revolving loan" such as another CC, I would think that a different type of loan would help your score more - such as a small personal loan from your bank or credit union. ***ONLY if you are not going to be applying for a mortgage in the next 12 months***

The FICO takes into account different types of loans as well as lots of other factors. SInce you have already proven yourself responsible with the CC which is a revolving loan, my advice would be to prove yourself responsible with an installment loan (certain number of payments and it is paid off...the credit line is no longer available after that).

What do others think?

Also, it would help to read FICO's brochure on how they calculate your score: http://www.myfico.com/Downloads/File...FS_Booklet.pdf

HTH

[poundwise]

Originally Posted by MarianneJ

Actually, instead of getting another "revolving loan" such as another CC, I would think that a different type of loan would help your score more - such as a small personal loan from your bank or credit union.

The FICO takes into account different types of loans as well as lots of other factors.

What do others think?

What you say regarding FICO scoring is true and I tend to agree that one would probably do better opening another type of account rather than a 2nd credit card; at least, one would do no worse.

However, then it becomes a matter of common sense to me. Basically what one is doing then is paying money and losing money (paying interest to and not earning interest on) in order to attempt to marginally increase one's credit score.

It is doubtful that a single such thing could change the score enough to matter much, if any, anyway. But regardless, I certainly wouldn't pay/lose money to try to attempt to effect my score in this way.

I think this is, at least in part, why the idea of a 2nd card is appealing. It can be obtained, utilized, and, if paid off each month, will not necessarily cost anything.

Of course, my own opinion is that people obsess way too much over their score anyway, and such usually leads people to do many things against common sense.

[MarianneJ]

You could get the loan and put the proceeds in an online savings at a decent rate. That way you aren't really spending that much to get the experience on the credit report. (The borrowed rate minus the amount you're making in savings). Of course like you said, it may not be worth enough to really matter toward the score...but I really don't know. That ol' FICO score is an enigma!

[titi]

Originally Posted by magnate

I only have one credit card. I have a 10k limit and have never paid any finance charges – I always pay the full balance when it is due.

Would it be wise for me to apply for another credit card so that I have a second line of credit? Would that raise my credit score and make it easier to get a mortgage in the future?

In your case a second credit card will probably help. Needless to say, that you must pay off your balance in full. I don't know for sure but I think that up to 5 credit cards with a reasonable limit and no late payments is acceptable for creditors. But I know that each open lines of credit is regarded by creditors as an increased credit risk.

[jlvkfyang]

I never understood why it is a hit towards your FICO if you close a credit card. I always thought that it should help in decreasing your lines of credit and credit risk.

[PRICEPLUS]

The card has a history and even if you don't use it you are seen as resposible. So if you have a card for ten years and then you close it you lose that history. The history would grow if it were open. FICO deals a great deal with good credit HISTORY!

I hope I said that right but it is late and I am tired!

[trillium]

You're FICO starts taking a hit when you have over 7 lines of revolving credit, if I remember correctly.

Found this out there:

How your FICO is calculated:
Types of Credit in Use: 10%--Considers the number of credit accounts and the mix of credit types: credit cards, installment loans, mortgages, and is most important if you don't have a very long credit history.

Payment History: 35%--Takes into account (1)many different types of payments, including mortgages, major credit cards, department store credit cards, car loans, other installment loans such as for furniture, etc., (2)information from public records, such as bankruptcies, liens, lawsuits, foreclosures, judgments, and wage garnishments, (3)details of any missed or late payments, such as the amount, how long ago it occurred, how late it was.

Amounts Owed: 30%--Looks at (1)the total of all the amounts you owe for all accounts, (2)the mix of amounts owed (credit cards versus installment loans, for example), (3)the number of accounts that have balances, (4)how much of your total credit available on credit cards and installment loans you're using (the closer you are to maxing out your available credit, the more negative the impact on your score), and (5)how much of the original balance borrowed you still owe on installment loans, like your car loan.

Length of Credit History: 15%--As long as you don't have negative information in your file, the longer your credit history, the higher your score.

New Credit: 10%--Considers (1)how many new credit accounts you've opened recently, (2)how long it's been since you opened a new credit account, (3)how many requests you've made for credit recently, (4)how long its been since lenders have requested credit information on you, and (5)how good your recent credit history has been.

[vishenda]

I agree with you poundwise ^__^