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:
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?
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.