Credit scoring and scores is a common discussion in these forums. This is a link to an AOL article that they posted today regarding credit scoring.
Hope it is useful.
It would be stupid of me to dispute the spokesman for Fair Issaac, however, here is what we mortgage brokers tell people.
3-5 credit cards is optimal. any less and you don’t have enough unless you already have a mortgage and a couple car loans. Any more and you start creating problems. I have a personal friend who has spotless credit and can only get a 740 score with 10 cards and no balance except on his AMEX which he pays off every month. He cancelled 5 and within 2 months his score went up about 40 pts.
Use your credit cards. Carrying cards that have no balance does not give any “paid as agreed” history. Buy a tank of gas and pay it off at the end of the month.
Although the article states 30%, 20% balance seems to be better. It is also better to have 3 cards with a 30% balance than 2 cards paid off and one at the max. If you are paying down your cards, pay them off evenly, do not concentrate on just one at a time.
Gas cards and some store cards don’t report. Don’t bother with them unless you need them. Visa/MC are the best.
If you have lousy credit, get a couple of secured cards and use them to develop a history.
Don’t expect miracles over night. It takes a couple years to build your credit history UNLESS you get a mortgage which will build your history and score quickly.
prepaid visa cards are not the same as secured visa cards and will do nothing to build your score.
It hurts your credit score when you cancel or close out credit cards that have a positive payment history. The best way to get your scores up are to keep cards open and maintain a low or 0 balance. The best way to know what will happen to your score if you want to make any changes is to go to myfico.com. Sign up for credit score simulator. This program tells you how many points your scores will drop or increase if you do a specific action. It’s great, and my company uses that product all the time to determine how many points a persons credit score will go up if we add seasoned tradelines.
Stikkee
Nice article MDHAAS. Thanks for the link. 