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My credit score recently took a dip after I paid off my student loans recently.

When I look at the credit report via mint it shows a "not bad" rating for number of accounts opened. ("not bad" is the second worst out of 4: bad, not bad, good, excellent)

To get into the "good" range it has a range of 13+ accounts. I currently have 4 credit cards, 1 care credit account, and 1 auto loan. How could I ever get to 13 accounts? I have a good income so I could apply for more credit cards, but 4 already seems very high.

What can I do to get the highest rating in this category of account quantity?

Note: this question is only regarding the category of quantity of open accounts in a credit score rating. Every other category is maximized (except for age of credit, which all I can do for that is wait)

Ben Miller
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James Wierzba
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    I don't have anywhere near 13 accounts and I'm above 800. What are you looking at? – quid Jun 27 '17 at 17:10
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    @quid mint.com credit score breakdown. I agree, it seems absurdly high – James Wierzba Jun 27 '17 at 17:10
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    I would not worry terribly much about what mint thinks about my credit score and how it's calculated. Does mint show you your FICO score or just this "advice?" – quid Jun 27 '17 at 17:12
  • @quid It gives you the FICO score then has a interface that attempts to explain why your credit score is what it is – James Wierzba Jun 27 '17 at 17:13
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    I'm in the same boat as quid, single-digit number of accounts and well over 800. That particular number counts very little, concentrate on other factors. – Kevin Jun 27 '17 at 17:13
  • I only have about 5 accounts total and I'm well on my way to 800. I don't mean to pry but what software are you using to check your credit? According to my credit software, the number of accounts is relatively low impact. If you don't have a lot of activity on your account, I would say just use your credit card more. The answer to this question may help: https://money.stackexchange.com/questions/67220/about-to-pay-off-car-loan-how-to-maintain-credit-score?rq=1 – CSRenA Jun 27 '17 at 17:31
  • @CSRenA It is stated in the question, mint. mint gives you your credit score and has a "breakdown" feature that rates you on the credit score criteria e.g. credit utilization, derogatory marks, age of credit, number of accounts, and inquiries – James Wierzba Jun 27 '17 at 17:32
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    I apologize, I skimmed over that. I use Credit Karma which states that account numbers are relatively low impact. Maybe try increasing your utilization? Your number of accounts would also have a bigger impact if your credit is relatively young. – CSRenA Jun 27 '17 at 17:35
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    Sounds like that is the consensus here, ...that I am over-estimating the impact of this to my score, and also over-estimating the standard quantity of accounts – James Wierzba Jun 27 '17 at 17:45
  • What did your score change from and to and did anything else change besides paying off the loan? When I pay off loans my score always goes up, not down. – TTT Jun 27 '17 at 18:22
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    I think you are also trying too hard to "maximize" your credit score. Anything over 740 is generally considered low-risk, and incremental steps above that will very likely not have ANT effect on your personal finances. Pay off your bills, use as LITTLE debt as possible, and your credit score will take care of itself. – D Stanley Jun 27 '17 at 18:28
  • My goal is to finance real estate so that is why I am nit picking so I can get the financing I need – James Wierzba Jun 27 '17 at 19:14
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    What are your actual scores reported by Mint, before and after you paid off your loan? The "advice" given by Mint cannot necessarily be trusted, as they (just like Credit Karma, and others) make money from credit card application referrals. – Ben Miller Jun 27 '17 at 19:36
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    @BenMiller 714 -> 701, it could be due to another factor but there is nothing I can think of that would have contributed to this. Only change was lowering my credit utilization (which should have raised the score) – James Wierzba Jun 27 '17 at 19:37
  • Are you sure you are looking at the right data? Maybe your credit score is not yet updated after you paid off the loans? Did you pay off the loans through a credit card or something? Are you perhaps forgetting some other transaction? There is no way your credit score can decrease after you pay off your loan. – Masked Man Jun 28 '17 at 07:37
  • Loans for investment property usually require at least 20% down, which will help your loan rate more that credit score. If you pay your bill on time, don't open new accounts (to keep your credit age high) and don't use too much of your credit, you'll be fine. The second argument is whether you should borrow to buy investment property, which is a different discussion :). – D Stanley Jun 28 '17 at 13:27
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    Bear in mind that the score is a ranking of how much money the bank can expect to make off of you if they give you a loan. It is not about your financial fitness. Once you pay off a mortgage, the ability the banks have to make money from you is reduced, so of course your score decreases. I actually have no score because I have had no debts in over a decade. If I wanted a new house badly enough I could buy it with cash, so the banks are not going to make money off of me. – pojo-guy Jun 29 '17 at 04:49
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    @pojo-guy, Again, I can appreciate your contra-credit-industry attitude but this guy wants a higher score not an obscure philosophy lesson. If you're happy with your position you should post it as answer. – quid Jun 29 '17 at 19:14
  • Comments are not for extended discussion; this conversation has been moved to chat. – GS - Apologise to Monica Jun 29 '17 at 20:50

4 Answers4

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First, you need to be aware that the credit score reported by Mint is Equifax Credit Score. Equifax Credit Score, like FICO, Vantagescore, and others, is based on a proprietary formula that is not publicly available. Every score is calculated with a different formula, and can vary from each other widely. Lenders almost exclusively only use FICO scores, so the score number you have is likely different than the score lenders will use.

Second, understand that the advice you see from places like Mint and Credit Karma will almost always tell you that you don't have enough credit card accounts. The reason for this is that they make their money by referring customers to credit card applications. They have a financial interest in telling you that you need more credit cards.

Finally, realize that credit score is just a number, and is only useful for a limited number of things. Higher is better to a point, and after that, you get no benefit from increasing your score.

My advice to you is this:

  1. Don't stress out about your credit score, especially a free score reported by Credit Karma or Mint. If you really have a desire to find out your score, you can pay FICO to get your actual score, but it's not cheap. You can also sometimes get your FICO score by applying for a loan and asking the lender. I last saw my FICO scores (there were three, one from each credit bureau) when I applied for a mortgage a couple of years ago, and the mortgage rep gave them to me for free. But honestly, knowing your score doesn't do much for you, as the best way to increase it is to simply make your payments on time and wait.

  2. Don't give in to bad conventional advice from places that are funded by the financial services industry. The thing that makes your credit score go up is a long history of paying your bills on time. Despite what you commonly read about credit scores, I'm not convinced that you can radically boost your scores by having lots of open credit card accounts. At the time I applied for my last mortgage, I only had 2 open credit cards (still true), and the oldest open account was about 1.5 years old. The average of my 3 scores was just over 800. But I've been paying my bills on time for at least 20 years now. Only get credit cards that you actually want, and close the ones you don't want.

Ben Miller
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    +1 for shining light on the commission relationship between the advice and the credit accounts. – quid Jun 27 '17 at 21:26
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    The bias due to their commission makes perfect sense, I never considered it. – James Wierzba Jun 27 '17 at 23:28
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    @JamesWierzba If you aren't paying for a service, you aren't the customer. You are the product. – Yakk Jun 28 '17 at 13:51
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    Can't stress that enough, @Yakk - Always ask two questions: 1) Is this organization a legal listed charity? Case NO: 2) "how are these guys making money out of their product/service"; Case Don't Know: "they are making money out of you." - how is left as an exercise. – Mindwin Remember Monica Jun 28 '17 at 13:56
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This answer is an attempt to answer the actual question posed. Please keep in mind that this applies specifically to the Equifax credit model that Mint uses as mentioned in the accepted answer, and that different models may react in different ways (or not at all).

As mentioned in the comments, the number of total accounts you have does not have much bearing on your overall credit score. If you click on Mint's "About Total Accounts" link, you get the following statement:

Total Accounts has a low impact on your score.

Second, the way the Total Accounts score is represented is misleading. This is not a count of the total number of accounts you have open, but rather how many accounts you have in your total history. Mint's header under this metric is flat out wrong:

Try to have a good mix of credit lines open.

To back up the assertion that this is looking at total accounts in your credit history rather than just those that are open, my Mint report shows 2 open accounts and 7 closed accounts, for a total of 9. Under the Total Accounts metric, I am plotted smack dab in the middle of the "Not Bad" range, right where people with 9 would be plotted.

So the proper advice here is to just let it be and only open new accounts as you need them. As you amass credit history, this metric will continue to grow naturally - it should never decrease.

You may ask, then, why did your overall score decrease when you paid off your student loans? Most likely because your average age of credit dropped when you closed your loan account. If you're like most people I know, your student loan is one of your oldest accounts, so closing that account will hurt your score - credit age is measured only on your open accounts.

S. Grey
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You don't need a credit score.

After I paid off my house mortgage many years ago I had this discussion with my mortgage agent (now bank VP).

Your credit score is not a measure your ability to repay. It is a behavioral model and a statistical measure of the likelihood that the banks will make money off of you when they give you a loan, and a marketing tool that the banking industry uses to sell you long term and short term debt (mortgages and credit cards).

Statistically speaking, people who close out major loans change their behaviors, and the model captures this change in behavior.

In my own case, even though I have a credit history and sufficient cash is the bank to buy my next home outright, I have no credit score . What the model says is that people with my behavioral profile are not likely to take a loan, and if they did take one, they would pay it back so quickly that the bank would not even recoup the cost of initiating the loan. In short, people with my profile are bad news for the loans side of the bank.

Thanks @quid for suggesting I capture this and post it as an answer

pojo-guy
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  • if they did take one, they would pay it back so quickly that the bank would not even recoup the cost of initiating the loan Doesn't the interest get tacked onto the loan balance immediately? So even if you wanted to pay it off in full, the bank would still make their same full profit, right? – James Wierzba Jun 29 '17 at 19:58
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    Interest is paid out monthly. I will grant that initiation fees are legal in some jurisdictions, as are early closing fees. But when those are invoked the banks still rarely break even. – pojo-guy Jun 29 '17 at 20:02
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    +1 from me for the bank's view of credit modeling. – quid Jun 29 '17 at 20:21
  • @pojo-guy are you implying that if I decide to pay off my loan in full after the 1st year of my mortgage, all of that payment will go to the remaining principal and the bank will lose the remaining 29 years of interest payments they would have received ? – James Wierzba Jun 29 '17 at 23:52
  • That is a matter of straight math. The typical 30 year mortgage is structured pretty much as you day. Some jurisdictions allow early payment penalties to ensure that the banks remain profitable in this scenario. – pojo-guy Jun 30 '17 at 00:09
  • @JamesWierzba That is true, but it's not that big a deal for the bank because they also now have the principal back to loan out again. I'm not sure why some folks here think this scenario is not profitable for the originating bank. The bank's marginal cost for making a loan is not that high and largely captured by origination fees. I am skeptical of the theory that the change you observed is factoring in prepayment risk; decreasing average account age seems a more likely explanation. – Nobody Jun 30 '17 at 09:47
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    -1 from me. "How do I improve my score?" "You don't need a score." Not quite Q&A, but worse, you can offer the same non-advice on nearly any credit score question. – JTP - Apologise to Monica Jul 04 '17 at 23:44
  • Focusing on the fundamentals, the credit score will improve. Attempting to game the system to improve the credit score usually ends up badly. Consumers do not benefit from a credit score, banks do. – pojo-guy Jul 05 '17 at 00:56
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    Strangely, I just upvoted both quid's and JoeTaxpayer's comment. +1 + -1 = 0 from me. I found this answer interesting, but probably not a good answer to this question. – TTT Jul 19 '17 at 15:29
  • @TTT As JoeTaxpayer noted, it's pretty much a formulaic response for credit scores in general. When you think of it from the banker's perspective, then look at the furniture in the bank compared to the furniture in your house, you start to see it as a liability. – pojo-guy Jul 19 '17 at 17:40
  • @pojo-guy - I agree. Perhaps your first sentence might better be stated as, "If you're like me, you don't need a credit score." But most people aren't like you... – TTT Jul 19 '17 at 18:10
  • If you want to become like me, start by getting rid of the credit score. :D . Banks need them, but consumers don't. – pojo-guy Jul 20 '17 at 00:42
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Build your credit history by paying the credit accounts you have on time. Review these periodically and close the ones you do not need.

Ignore your score until it is time to make a large purchase.

Make decisions regarding credit on the basis of whether the debit would be better paid with cash or credit. Not on credit score.

Keep in mind that if your income is invested in your future, your money is working for you. The income that is paying debt is working for the lenders.

Mint is a financial services industry company (Intuit). You are their product. Intuit makes money from Mint by placing ads on the site where you visit frequently, and by gathering data about those who subscribe to their service. They also are paid to refer you to credit card companies to "build credit."

Xalorous
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