Trying to improve my credit score

[blondie]

Hi,

I would like to buy a new car in the next few months, so I have been trying to improve my credit score to get a decent rate on an auto loan. I have paid off all my old collection accounts, and opened two secured cards last month so I have a total of three good accounts that I will use regularly. My question is, has opening these new accounts actually hurt my credit situation instead of helping it? I just checked my fico scores again, and they have stayed about the same, and actually went down with one bureau. How long do you think it will take before I see an increase in my fico scores? Or is there something else I should be doing?

[Japhet11]

Hi Blondie,

Trust me when I say that you're on the right track. It's not going to be an overnight thing, where you wake up one morning to find that your scores are now 100 points higher than they were. It's more likely to be a gradual increase over time. But you've taken the right steps and it seems like you have a fairly decent handle on how to improve credit. What you want to do now is make sure that your balances on those two new cards remains very, very low. Somewhere between 10% and 20% will probably be best for you. A zero balance might indicate to lenders that you're not using it at all, which is only bad because they want to see that you are using it, but using it responsibly.

Also, make sure that both secured cards are reporting to all three of the credit bureaus. If they're not, then it's not doing you any good. Ideally, you want to use these cards to build up your credit scores and get other cards, don't keep the secured cards for too long. There's no definite time period for when you should see your scores increase, but generally you'll want to take a look at your scores at 3 months and 6 months from when you started with the secured cards. At 6 months, hopefully you can close those secured accounts and open two new card to take their place.

Somewhere between 3 to 5 open lines of revolving credit is where you want to be to maximize your scores. Don't open up too many lines of credit or you may end up in a similar situation, having to pay off debts and start over.

Let me know how it goes, I'm interested to see if the scores go up over the next few months. If they don't, there may be other items on your credit profile that are holding those scores down. As always, if you wanted me to take a look at your credit report, our consultations are always free at mycreditgroup.com.