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Right now, the only credit account I have is one credit card, which I've had for about two years. If you don't count as debt the couple hundred dollars I put on that card and pay off in full each month, then I'm completely debt free. I finished paying a small student loan immediately after I graduated, and I don't have a mortgage, car payment, or any other type of debt.

I plan to stay debt free, but I appreciate the non-debt-related advantages of having a good credit score. Here are a few advantages from an answer that @JohnFx posted to this question:

  • Insurance companies are factoring them into their calculations regarding how likely you are to make a claim.
  • An especially bad credit score can hurt your chances of getting a Government security clearance.
  • Employers can use negative information on your credit report to make hiring, firing and promotion decisions (except for bankruptcies).
  • Landlords may use them to decide whether to rent to you, and how much deposit to charge.
  • Cell phone providers use them to decide what payment plans you can get.
  • Utility companies sometimes use them to decide how much deposit you need to pay.

My credit score is fairly high—it drifts between 740 and 760 each month, but I would like to have it consistently above 760. My understanding is that anything beyond that is icing on the cake, but doesn't make a big difference.

For reference, per the FICO website, the five score criteria are:

  • (35%) Payment History
  • (30%) Amounts Owed (utilization)
  • (15%) Length of Credit History
  • (10%) Credit Mix in Use
  • (10%) New credit

My utilization is good. It's about 5% each month. However, one of the limiting factors of my score is account age (understandable as I don't have extensive credit history). Another limiting factor is lack of recent loan installment information. Both of those factors are coming from FICO each month. But I think credit mix might also be hurting me because I only have one account right now. I have two questions then:

  1. Would opening a second credit card contribute in any meaningful way to my credit mix or no, since it's the same type of credit?

  2. If yes to (1), is it worth it to take the hit to my average account age sooner rather than later by opening a new credit card?

As a final note, while I understand the risks of credit cards, I'm very disciplined and self-controlled when it comes to money. If I open another account, I'll simply split what I spend now across both cards—my overall spending would not increase. If anything, my utilization in proportion to my total credit would go down.

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    I don't know what "credit mix" is or why you want to manage it. This sounds like a mistaken attempt to let the credit rating tail wag the financial dog. – keshlam Feb 03 '17 at 13:32
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    It's one of the five categories that make up the FICO score: What’s in my FICO Score?. It accounts for 10% of one's overall score. –  Feb 03 '17 at 13:33
  • Related: http://money.stackexchange.com/a/73728/17718. The only difference is that you don't have any debt at all right now, so your utilization % is probably at 0, and cannot go any lower. The rest applies though. – TTT Feb 03 '17 at 19:23
  • @TTT While there's a lot going on in my question, my primary questions (1) and (2) concern credit mix, which isn't mentioned at all in the linked question. There is some interesting additional information in that question, though, so thanks for linking it. –  Feb 03 '17 at 19:32
  • @arbitrarystringofletters - I agree. It doesn't answer your questions, but describes "what happens when you open a new card" which is somewhat related to question 2, and possibly "is it a good idea to do it". – TTT Feb 03 '17 at 19:44
  • @TTT 'Utilization' includes charges that were on your card at time of statement posting, even if you pay them off every month. I always pay off my cards every month, too, but my utilization is positive due to the charges on the card when the statement closes before I pay it off. – reirab Feb 03 '17 at 21:47
  • @reirab - valid point, and I agree. (I shouldn't have called it 0%.) It depends on what the denominator is: If you spend $200/month on a 10K limit card, and open another 10K limit card, then 2% utilization goes down to 1% which probably won't affect your score much. But if your limit is 1K and you get another 1K limit card, utilization would drop from 20% to 10% which would likely have a greater positive benefit. – TTT Feb 03 '17 at 22:38
  • Related: Is it ever a good idea to close credit cards? – Ben Miller Feb 03 '17 at 22:56

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Would opening a second credit card contribute in any meaningful way to my credit mix or no, since it's the same type of credit?

Yes, multiple lines of credit help your credit score, even if they are all credit cards. There are experts on both sides of this argument though. For example, Fico says that you shouldn't open a new credit card just for the credit boost, while NerdWallet cautiously recommends it. My recommendation is that if you're disciplined with your credit spending, it will help a little.

If yes, is it worth it to take the hit to my average account age sooner rather than later by opening a new credit card?

If you want to build up your number of credit lines, do so well before you need to use your credit to take out a loan. Not only will your credit score take a hit from the average age dropping, but you'll also have a hard pull on your credit report.

As Fixed Point points out, though, you will see a larger improvement to your credit score by adding another type of credit, such as a home loan, to your credit mix. If you are already limited your credit utilization to 10%-30% then you probably won't be able to reach your goal by just adding a credit card.

Nosrac
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  • Thanks. I don't have any immediate plans for taking out any loans, but I am looking at apartments and changing my car insurance. I would likely open a new credit card right after I did both of these things to dodge the effects of the short-term hit (potentially increased security deposit and insurance premiums) from opening the account. –  Feb 03 '17 at 13:42
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    @arbitrarystringofletters, It sounds like you have a solid plan. You may want to consider opening a couple lines of credit if the timing is right. Don't forget to get some cards with good rewards too! – Nosrac Feb 03 '17 at 13:43
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    Keep in mind that NerdWallet and CreditKarma make their money on the referral fees from their credit card ads. That may have something to do with their advice to get more credit cards. And FICO is the only one that knows the credit score formula, so perhaps their advice should be given a little more weight. – Ben Miller Feb 03 '17 at 13:59
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    @BenMiller That's a good point, but also note that FICO's article that gives that advice is called "How to repair my credit and improve my FICO Scores". To me, the repair part of the title indicates their target audience includes people who historically don't handle credit well. For people in that situation, getting a new credit card likely presents more potential risk than benefit. –  Feb 03 '17 at 14:13
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    @BenMiller thanks for your insight into those sites' biases. I had not considered that – Nosrac Feb 03 '17 at 14:48
  • If your score is already this good, you should completely ignore all the advice about how to improve your score. There is very little to be gained by trying to optimize this further. – keshlam Feb 03 '17 at 15:34
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    @keshlam - I disagree. Some mortgage companies will only give you the best possible rate if your middle of the 3 FICO scores come back 760 or higher. OP is in the type of situation where it makes sense to tweak to ensure it stays above 760. – TTT Feb 03 '17 at 19:20
  • I am going to disagree with this answer though I only have a sample size of one (namely, myself). I think a real mix (credit cards, car loan, mortgage, etc.) is the solution. Getting another credit card won't help the OP. I have had up to about 8 cards at a time but my score never went above 760ish even if my utilization is very low. One reason, I always see on reports from the bureaus, banks, card issuers, etc. is that I need other types of loans like a long term mortgage or a car loan to increase my score. This is from last 12 years of me experimenting with my credit. – Fixed Point Feb 03 '17 at 20:28
  • @FixedPoint, can you comment on how your credit score changed after you added your second credit card? – Nosrac Feb 03 '17 at 20:38
  • Ever since I got my first card, I had been very careful with it so utilization was low and no balance was carried forward. So after about a year, when I first learned about and started checking my report and scores, it was exactly what the OP says. The scores drifted between 740-760. After adding a second CC, I actually didn't see a change at all. The scores still drifted between 740-760. And they drifted no matter what I did with the cards. I specifically remember this because I was very irked why wouldn't my FICO go above 760. – Fixed Point Feb 03 '17 at 20:44
  • After about 7-8 years of this, I realized that it was because they want to see "other types" of loans on my report. Then I started seeing this "recommendation" on my subsequent reports. To this day, I haven't needed such a loan and to this day my score has never gone above 760 no matter what my balance, utilization, credit history, average age of an account, etc. is. – Fixed Point Feb 03 '17 at 20:47
  • @FixedPoint, you make a good point! I will change my answer accordingly – Nosrac Feb 03 '17 at 20:59
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    @FixedPoint That could have something to do with the number of card accounts you have open and the average age of those accounts. Prior to getting a mortgage, CCs were my only type of credit (and I paid them off each month.) I had 2 or 3 of them at the time, IIRC. My credit score was over 800. The oldest of the accounts had been open around 6 years at that point, IIRC. – reirab Feb 03 '17 at 21:51
  • @reirab Maybe there are some additional confounding variables here (besides the long-term-loans I mean) but I don't know what they could be. My oldest card (which I still have) is more than ten years old and my FICO still refuses to go above 760. – Fixed Point Feb 03 '17 at 22:09
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    @FixedPoint You said you had up to 8 cards at a time, so that's why I suspected the average age might be on the low side. Having several relatively new accounts can reduce the score due to both the effect on average account age as well as the hard pulls. – reirab Feb 03 '17 at 22:18
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I plan to stay debt free, but I appreciate the non-debt-related advantages of having a good credit score.

If you plan to stay debt-free, then opening up more cards will not significantly change your credit score. You seem to want to be going from a good score to a great score, which adding cards alone will not do.

Also, I highly doubt it will significantly affect any of the five things you mention. If you had a bad credit score, then I could see some effect on renting an apartment, getting a job (where trust with money is a component of the job), etc., but don't try to game the system for some number. You won't magically get cheaper cell phone rates, lower insurance premiums, etc.

D Stanley
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  • Ok, thanks. I appreciate the additional perspective. –  Feb 03 '17 at 14:29
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    Once you're in the 'good' range, the only time score really matters is if you're wanting to get the absolute best rate on a new line of credit, like a car loan or a mortgage. You are living within your means, the range of your scores are well into the 'good range', that will satisfy any of the reasons you mentioned in your post. Keep living within your means. Your energies would be better served if you research and strive for financial independence. You're staged to go for it. If you're financially independent, you won't need a credit score. – Xalorous Feb 03 '17 at 15:53
  • @Xalorous Incidentally, financial independence is one of my primary goals right now! That's one of the reasons I'm trying to save whatever I can on insurance premiums and the like. –  Feb 03 '17 at 15:57
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    Everything I just read tells me you're already doing it right. If it were me in that situation, I'd shift to looking at reducing in other areas. Of course you want to review those periodic expenses on a regular basis. I wouldn't spend more time worrying about changing credit score unless it starts to dip. At this point, it's like a writer worrying about penmanship when they type all their work. – Xalorous Feb 03 '17 at 16:08
  • @Xalorous Haha, fair enough. Thanks for the advice. –  Feb 03 '17 at 16:10
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    Based on my personal experience, I disagree with this answer. I had a credit score over 800 before I ever had any type of credit other than a credit card. I had at least a couple of credit cards that had been open for several years and paid off each month (might have also had a 3rd at that point, but I can't remember for sure.) When I first got a mortgage, my banker seemed a little surprised to see a 23-year-old with a score over 800. – reirab Feb 03 '17 at 21:55
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Short-term it will not help, it will actually hurt your credit score. Long-term, it will help for a couple of reasons:

  • You will probably have a higher credit limit among multiple cards. If you are paying all of your balances each month, the current balance will still show up if it is not paid on the day that your credit card company reports to the credit agencies. Having a higher collective limit will show a smaller ratio of used to available credit.
  • Some of your score is based on average age. (This is why in the short-term it hurts, but in the long-term it can help). If you have two open accounts that are each 10 years old, then opening a third account when you sign a mortgage only takes the average age down to ~7 years instead of ~5 years if you only had one old account. This only helps if you plan to keep this card account open perpetually.

The mix that others refer to is mortgage and auto loans which do not count as revolving credit. A mortgage will help more than a credit card in this case, but may not make sense in your circumstances.

NL - Apologize to Monica
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  • Thanks. Regarding short-term concerns, see my first comment on @DanielCarson's answer. –  Feb 03 '17 at 15:51