I used to get stuck in the vicious cycle of credit cards, running them to the limit, having no money to pay it, having the card closed on me for not making minimum payments, just really bad habits overall.
I’m finally at a point where I have savings (more than my yearly salary saved), a 703 credit score, a job with stable growth, and some loans totaling $15k for school & my car. I haven’t had a credit card in a couple of years, but want to prepare to buy a house. My credit score isn’t going up with making payments on time, so I’m thinking I need to expand my borrow limit & start using a card for daily purchases then paying it off monthly.
I did like 4 hours of research and I’m thinking of getting 2 credit cards: AAA Daily Advantage Visa (because I buy groceries for our house & the rewards seemed competitive with or better than the other cards) and Wells Fargo OneKey Cash (because I travel at least every other month using those brands). These were just all-around good fits for my situation.
Please comment if you have anything to chime in, but my main question is - how will it impact my credit score? Is it bad if I apply to both cards in the same day, or would that be better? I thought if they check my credit, there’s a sort of time window for it to be checked without taking more points away (not sure if that’s accurate, but I’ve heard different things from lenders in the past).
Nice job reevaluating your approach to credit and taking a far better path. Having more than a year of salary in savings is impressive and not something many can say they’ve accomplished!
As far as your question goes, a credit profile absent of revolving credit is significantly weaker than one with it. If you were to open a new card, your profile would strengthen immensely once it reports and your credit scores would respond favorably as well. The same would be true if you opened 2 cards at the same time. If 2 cards both appeal to you, I’d say there’s value in opening both at the same time and allowing them to age together. From there just sit on your hands and open no other accounts until after you obtain your home loan.
@Laine
Totally agree. If you do decide to apply for both, expect your credit score to take a slight dip since you’ll have some fresh inquiries. Don’t be alarmed though, they are temporary and the scores will rebound in about 3-6 months.
I would expect Wells Fargo to double, possibly triple pull your credit so I’d apply there first. Between the 2 cards you’re looking at, Wells Fargo is more sensitive to inquiries.
If you do decide to apply for both, expect your credit score to take a slight dip since you’ll have some fresh inquiries.
OP’s scores would not drop though; they’d increase. They currently have no open revolving credit lines. Opening one can usually mean a score increase of around 70 FICO points in many cases.
Also, any score drop related to an inquiry lasts for exactly 365 days with no “aging” of them during that time frame, so those points would not come back in 3-6 months.
@Laine
Sounds like we have a different understanding of the inquiry score impacts. You are correct about the 365 mark (this is when the inquiry stops “pulling” on the profile and any score impacts are washed away), but they certainly do impact the score within that 365 days.
As time passes, the impact reduces. It’s very similar to a delinquency, just not as dramatic.
However, each profile can be hit differently when new activity pops up, so I shared from a precautionary perspective. If what you’re saying is more accurate than my understanding, then there will be zero loss and it’s a great day! But if it does come down slightly, then it wouldn’t be a shock or unexpected.
Sounds like we have a different understanding of the inquiry score impacts. You are correct about the 365 mark (this is when the inquiry stops “pulling” on the profile and any score impacts are washed away), but they certainly do impact the score within that 365 days.
My understanding is based on personal testing of the algorithm. What is yours based on?
They impact a score the same exact amount of points on Day 1 when the inquiry is taken on that they do at the end of 365 days just before it becomes unscoreable.
As time passes, the impact reduces. It’s very similar to a delinquency, just not as dramatic.
That’s not true at all. I’ve tested it personally, cleanly 3 times myself, and that’s not counting the countless other times that I’ve corresponded with others that have tested it cleanly as well.
In a clean test, if you lose X points at the time an inquiry is incurred, exactly X points return in one shot after Day 365 passes.
@Laine
The same - personal experience. I certainly haven’t tested any algorithms. Not sure how you could account for all the influencing factors. It’s just info though - always better to be overly informed than unaware. As one develops more knowledge and experience, they’ll know what to retain and discard.
@Holt
Explain how with ‘personal experience’ you were able to conclude that an inquiry that impacted you (say) 7 points on Day 1 was impacting you a lesser amount than 7 points at some point in time inside 365 days. Without doing any testing, how would you be able to make that claim?
@Laine
I worked for the Fair Isaac Corporation, specifically on the development of the FICO 9, 10, and 10T refreshes. Left there 2 years ago so a lot could have changed, but the driving forces have been the same for a while. More of the recent (8-10 years) work is about how tax collections, medical collections, and defaults impact scores.
Of course, there are also Vantage scores, but I don’t put much weight there since they’re not widely used for decision making, although grossly published to the public as a reference.
Everyone will experience something slightly different, but overall, it’s pretty much the same across 90% of the population.
What are you basing your claim on that the impact of an inquiry lessens over the course of 365 days? If you’ve worked for FICO, surely you know about FICO negative reason codes and how you’d be able to cleanly test this out like I have.
Back to my example. You take on an inquiry that costs you 7 points. How would you conclude during any point in the next 365 days that the impact of that inquiry lessened from those initial 7 points?
@Laine
Not a claim - it’s the rule built in the actual system. Nobody said you should rely less on your testing - anyone can choose what they’d like. I’m only speaking to what the calculator is designed to do and its expected results.
I applied & Wells Fargo did not approve me for any card… internally crying… could it be the 3 or 4 credit cards that were closed on me? But that happened when I was 18-25 and I am 28 now. I thought I wouldn’t have a problem with it now that I made it to the 700s, but idk, maybe the actual score still shows in the 600s?
I did not think about what if I didn’t get approved… LOL
@Quill
That’s pretty recent. Any serious delinquency (a bank closing an account for you would be under that definition), is going to sting for about 5-7 years. The score increase you’ve been seeing is what I was referring to above.
Over time, the delinquency impacts will reduce month over month, but if you have uncared-for delinquent debt, some banks will be more motivated to steer clear from you.
You’ve applied and can put it behind you. Your other option is to apply for the other card (where that bank is a lot less forgiving than Wells) and see what happens, or start working to clear those old debts up (if not already done) and give it more time.
• Average monthly spend and categories:
• dining: $300
• groceries: $600
• gas: $150
• travel (car rentals, Airbnb, hotels, flights through common airlines): $200-500, depends
• I feed my dogs raw & purchase from a meat market for pets, not sure if it counts as groceries: $450
• Open to Business Cards: No
• What’s the purpose of your next card?
• 1st card - earn cash rewards, expand borrow limit, daily expenses & pay off monthly to build credit
• 2nd card - travel rewards, keep travel expenses separate, expand borrow limit, pay monthly to build credit
• Do you have any cards you’ve been looking at? Wells Fargo OneKey Card (was not approved), AAA Daily Advantage Card
• Are you OK with category spending or do you want a general spending card? Well, what are the pros/cons?