How to Handle a Thin Credit File and Improve your Credit Score
Thin Credit File
A thin credit file will not keep you from getting a high credit score but it will take longer than if you have a more robust credit file. I have seen a credit report with one account have a score in the 700’s but that file had a very long credit history. If you want to get a good score fast you need to add accounts. I had a viewer ask about what she should do to improve her score and how she should proceed?
Dave: Hi everybody Dave Sullivan here for the credit guy TV with special guest Joyce coming to you live from India. Joyce actually had a question about opening credit cards and I thought it would be very helpful for other people who are in a similar situation. Joyce what was your credit goal and what was your credit profile like when you started? What did you want to build up too?
Joyce: Well, My goal is to obviously to increase my credit score, but I also have kind of have a Thin Credit File. So I needed to, as per the advice of TheCreditGuyTV forms, I needed to add some credit accounts.
I went ahead and applied for maybe nine different cards. I opened up at least seven accounts up, with the sole purpose of improving my credit score. I don’t need the credit cards for spending, so I have seven new accounts and at this point, I think they have been open two and a half months. My credit score did take a dip because of that, I think probably 20 points, so between inquiries and the average age of my accounts decreasing at least temporally. My question to you was should I cancel a few of the new cards in order to increase the average age of my accounts?
Dave: You know the thing about opening new accounts, many people tell you that you shouldn’t open them all at once and I disagree with that advice. I really think you did the right thing.
Now, there’s a couple of things that are affecting your score now and you’re right about the average age of the credit accounts. The average age of the accounts on your repository file is going to be shorter than it was before you added all the new credit card accounts, but it is not nearly as important as the inquiry’s that hit your credit score all at one time.
You’re probably suffering from the nine inquiries more than anything else and then after six months those new accounts will really start to help build a great base for your credit score. Those inquiries will fall off altogether and then your score will improve even more. I would not cancel any of the credit cards that you opened. I wanted to ask you about your credit score goal. You said you wanted to increase your score? Do you want to buy a house? Or are you just overall concerned about your credit score is are certain time frame that you like to have a good score by?
Joyce: I don’t have a specific time frame but obviously I want to increase my credit score. What really started my credit score tracking was this past summer I got a new card which gave me access to my credit score.
I was too anxious and emotional to look at my credit report. I started looking at credit scoring and learning, I felt like I had to actually be able to do something about my credit score. So I started to get a little bit obsessive. I don’t have a definite credit score goal. I would like to get a car in the next six months and get a good rate. Maybe get property in the future but I don’t have any plans at this time.
Dave: It’s good that you don’t have an immediate need for high credit score which is perfect because you’ve made the right moves. You have taken actions that will set you up for good score in the future. Many people wait until right before they want to buy a house or right before they want to get a car to try to improve their score. Credit scores don’t really work that way. It takes time to build your credit up and a lot of strategies like opening new accounts are going to hurt your credit at first but then has time goes by and you make payments on time your score will take off.
What I wanted to tell people and the reason why I wanted you to be on the show was because many people are in this position of having little or no credit when starting out financially. People are unsure how to proceed to improve their credit and add more accounts.
What you really should do is do exactly what Joyce did. Apply for all the cards at once. Suffer through the dip in your credit score that will happen and then your credit will start too improved greatly after that.
Joyce: a few days ago my Equifax score improved by 26 points it sure seems to be starting to kick in already. I am pretty happy about that!
Dave: I need to caution everybody as well, because there are so many different credit scores out there that people get a false sense of security depending on what score they’re looking at. I can tell you that FICO which is the main scoring company that mortgage industry uses, and FICO has just come out with the FICO9 version.
FICO9 scores are typically higher than the traditional FICO scores. Where did you get your credit score? With a credit card offer?
Joyce: No, I want directly through MyFICO.com
Dave: Okay good! So you went through MyFICO.com. That is what I recommend, if you want to get close to your real credit scores you can find them at MyFICO.com, but even if you went to MyFICO.com you may have gotten a FICO8 or FICO9 version. Just so you know when you go to apply for a mortgage they’re still using FICO04 at Fannie and Freddie. Fannie and Freddie are looking at in updating their scoring models but because the newer FICO9 score will score higher than the older scoring models. As a result the minimum FICO9 score will be high higher than it is now. I think you did everything right and I know that there’s a lot of bad information out there and I’m just glad that you did do things correctly. You followed the correct information. I wish you well and safe travels back to America. I’m sure it was an incredible trip out there.
Joyce: Yes, thank you so much.
Dave: What one thing in is different in India? Or what do you miss most about the states?
Joyce: Besides missing family and friends, there’s no meat here. I am not a big meat eater but I do miss chicken. Rishikesh the city where we’re staying at, is a holy city, it’s called the yoga capital of the world. Also, I really honestly miss cheddar cheese and chocolate!
Dave: I know the chocolate… well yeah, I know that can be a big very important, is the quality in chocolate. Joyce, like I said safe travels back. I wish you guys both the best and I know that you’ll be in perfect credit shape when you get back to get that American made car.
Joyce: Yep, thank you Dave.
If you’re looking for other ways to improve your credit score please go to GetLoanReady.com you can get free videos and worksheets to increase your credit score from a more holistic perspective. Never Pay Collections
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Go to www.getloanready.com to find other ways to improve your credit score. I’m Dave Sullivan here for the credit guy TV so you with a little bit me we’re going to change the credit industry thank you