Are you saying that the more available credit lines a person has, the higher their score? I'm not too sure about that. I'm over 800, have 2 credit card accounts and a mortgage. I pay the cards off each month without interest and haven't had a car loan in 5 years. I generally pay all my bills on time. I have opened and closed two credit card accounts in the last 2 years. I'm not seeing any ill effects.
In general, the scoring model rewards those with:
- A variety of types of credit (installment, revolving, car, mortgage, etc.).
- Long history with this credit (very high scores can only come with this factor.)
- Low debt/limit ratios.
- No negative events (late payments, collections, public records. One single recent negative event, no matter the amount can have a major impact on scores.)
[It’s also important to know that the scoring model sees almost nothing of dollar amounts, only ratios.)
So, IN GENERAL, we can say the more lines the higher the score, up to a point. The difference between no revolving and two revolving accounts is a great deal more than the difference between two revolving and four revolving accounts.
In general, again, two-three credit card accounts with no lates and low balances is going to get you pretty much what you’re going to get from these lines - EXCEPT for the length of time you have a successful history with them. I.e., closing a one year old card hurts you a great deal less than closing a ten year old card.
So you have to look at each situation individually. Closing the same credit card can have quite different results depending on the rest of a person’s history.
What I’m saying on these threads is that in these times, crazy stuff is going on on the credit card side. And, the GENERAL effect of the companies actions lowers folk’s scores.
Which means we have to be more informed with accurate information now to deal with what’s coming at us. Those I trust are recommending keeping almost everything you can open and active because of the volatility - if you have three cards, you don’t know which one you’ll really need when/if the other two go south on you.
I hope this makes more sense.
I should have added the effect of credit inquiries (negative factor) to the score.
And there’s still more factors and inter-reactions; it can get really complex.
There are a few real experts in analyzing this for people - it can become quite important on major purchases, for investors, etc. The formulas are a trade secret of Fair Issac & Co., they’re not published. FICO gives general information, but that often doesn’t match up to individual cases in the real world. And there’s a ton of wrong information out there.
The experts I trust got their expertise from rapid rescoring, which allows a sort of controlled experiment with the black box of the FICO model. They do this with huge amounts of money involved in their success. I feel very comfortable having seen them work, but a lot is over my head, and it is often counterintuitive.
One of these guys describes his feel of it this way: FICO most rewards those who are very experienced in the credit game, who have played it a lot, a lot of different ways, have played it recently, are playing it now and have done all this perfectly.
He says you can put most or all of the scoring factors into this idea.
An example: Take a multi-billionaire with a million dollar a month income, owes no one, never owed anyone, paid cash for everything all his life, no credit cards, car loan, mortgage ever. What’s his credit risk based solely according to his FICO scores, high or low?
Low score, high risk.