There was just the story of a 25-year-old woman who had a credit score of 735. She had paid cash for every expensive item she had ever purchased, including her car. Her only credit history was a $600 secured credit card that she had opened 10 months ago and she had always paid her balances on time. She has utility bills, which she always pays on time. Her question was “would opening more credit cards improve my credit score?”
One financial expert I read pointed out that your credit card mix is only 10% of your credit score. But how you use your credit cards plays the biggest part in your credit score.
Adding more credit card won’t help
This means the short answer to the question “will opening more credit cards improve my credit score” is no. The best thing that this woman can do to improve her credit score is wait until the company that provided her secured credit card sends her an unsecured card (probably after she’s had the unsecured card for a year) and then use it sensibly. This means she will need to continue to make all her payments on time and not carry any balances forward.
The components of your credit score
As I wrote in a previous paragraph, your credit mix accounts for only 10% of your credit score. Your credit history accounts for 35% of your score and the amounts you owe accounts for 30%. The length of your credit history accounts for 15% and what’s called “new credit” is 10%. However, what’s really meant by “new credit” is how many times you’ve applied for new credit. This does not include what’s called involuntary credit score requests, which are those made by companies seeking to grant you credit such as pre-approved credit cards.
Do you know your credit score
If you don’t know your credit score, you need to get busy and find out what it is. Why is this? It’s because your credit score is what rules your financial life. If you have a good credit score of 750 or higher, you can get just about anything you want in the way of credit including credit cards that offer those luscious rewards. On the other hand, if you have a credit score of 600 or less, you may find it hard to get any new credit – unless you’re willing to pay very high interest rates. For that matter, a low credit score can even increase the cost of your auto insurance.
Where to get your credit score
If you go to the website www.myfico.com and sign up for a free trial of its Score Watch program, you can get your credit score free. Most financial experts say that your FICO score is your most important credit score because all three credit-reporting bureaus base their credit scores on it. Alternately, you could go to the site www.creditkarma.com and get your credit score free although it may not be identical to your FICO score. This is due to the fact that this score is based on a formula developed by the three credit reporting bureaus and won’t be the same as your FICO score. However, it will be close enough to it for you to know where you stand credit wise.