Few accounts on report, want to know tips on helping this

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staticjacket
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Few accounts on report, want to know tips on helping this

Postby staticjacket » Wed Feb 10, 2016 6:20 am

Hi. I'm in my mid twenties and recently decided to take credit seriously. My transunion only has 6 accounts, and my equifax only has 9 (score of 675). Credit Karma thinks this is poor and I need more debt! I'm curious how you go about helping this within reason as not to have a bunch of hard inquiries on your record. I'm planning on trying to get a mortgage sometime in the next year, but I'm afraid my limited history is going to hurt me. I need some advice.


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Vattené
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Re: Few accounts on report, want to know tips on helping this

Postby Vattené » Wed Feb 10, 2016 10:34 am

Welcome to the forum!

It's great that you're taking credit seriously, but you don't want to take Credit Karma too seriously. It is a good tool for staying on top of your reports and monitoring trends, but the model it uses for scoring is not a FICO model (which is much more widely used by lenders). According to Credit Karma my average age of open account is just over 2 years and there is an alarming "POOR" rating next to this. The data is true, and it would help me to have a longer average age, but I got a mortgage last year at the best terms available so it isn't hurting me as much as the impression I might get from CK's ratings. Average age is going to be one of the factors hurting me the most for a while (because I don't have a derog or anything worse doing more damage). The only way to improve this is to let things age, which takes a lot of time. If you take out a lot of new accounts, this factor will become much worse because it will hurt the average.

I think your plan of going for a Discover is a good one. You can build good credit with credit cards (and paying in full to avoid any interest); you do NOT need to go into debt to build good credit. You mentioned elsewhere you have an auto loan and student loans, so your mix of credit is already diversified and there is no need to pay anyone anything extra in interest just for an improved score. Your collection account is unfortunate, but unless you can successfully dispute it, it will remain on your credit reports for years to come. All you can do (and all you need to do) is manage what you have responsibly and make sure there are no missed/late payments on anything you do have (and actually know about!).
-Vattené
FICO-8:
EX - 827 (4/17) | TU - 812 (4/17)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

takeshi
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Re: Few accounts on report, want to know tips on helping this

Postby takeshi » Fri Feb 12, 2016 10:36 am

staticjacket wrote:Credit Karma thinks this is poor and I need more debt!

Be very careful relying on CK.

CK is not saying that you need more accounts. CK says that there is a correlation between those with high scores and those with a large number of accounts. However, remember that correlation and causation are not the same thing. One does not need to have a large number of accounts in order to have high scores. Also keep in mind that CK indicates that this factor has a low impact. Stop fretting over number of accounts. You probably have bigger issues that you need to address. Focus on the factors with high impact first.

Also, do not conflate accounts and debt. Installments generally require debt but revolvers do not.

staticjacket wrote:I'm curious how you go about helping this within reason as not to have a bunch of hard inquiries on your record.

Despite how people tend to obsess over them inquiries are also a smaller factor and even CK indicates this. If one is seeing a bigger impact from an HP then one has bigger issues to address. HP's may have a bigger impact for those with thin profile and/or issues with their profile.

We'd really need more information about your profile if you want help. Generally speaking, if you have any derogs then you need to work on getting them removed if possible. Derogs tend to have significant impact and tend to hold one's scores down as long as they are on reports. If you revolving utilization isn't in check then get in check as it's also another high impact factor. However, generally just aim to keep it under 30%. You can lower it as needed when applying.

staticjacket wrote:My transunion only has 6 accounts, and my equifax only has 9 (score of 675).

Don't overlook Experian.

CK's scores are only relevant to creditors/products that use a TU or EQ Vantagescore. Your mortgage lender will not use a Vantagescore.



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