Hello Everyone! These blogs are meant to inspire financial awareness from an economic, business, individual and behavioral sense. I hope you enjoy!
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It has always sparked my interest in how to achieve a higher credit rating through the credit bureaus. Generally, the higher the credit rating the lower the interest rate. Just the other day my friend and I had a friendly comparison of our credit scores. Openly, my score is around approximately 750 points. As many who know me, I am a very competitive individual. My friend showed me his credit score and it was approximately 790 points(he has the same general credit history as I do). Simply the difference between me and him was that he had 19 credit cards open in his name and I only had 5 credit cards in my name.
This seemed completely backward to me. First and foremost, how can one even fit this many cards in your pocket? The person who has a higher credit rating in this example isn't necessarily more successful than someone who has 5 credit card accounts open(even though according to credit reporting standards he is a better borrower and gets a lower rate). The discounts lenders would give in these cases would be nominal at best.
The next thing I wondered is do you really want to bootlick this many banks and credit cards?
If one is trying to achieve a higher credit score these accounts should be opened throughout many years, not quickly and artificially.
The creditors want to see that individuals are responsible for their lines of credit and a measure they use is a number of total accounts. Anywhere more than 10 credit accounts being used in a responsible fashion gets the credit reporting agencies happy. Note that managing this many accounts isn't easy, so if and when you do get this many accounts, make sure to set up a recurring expense(internet or a subscription) with automatic payments. The main point I would like to drive home is to take your time opening new accounts. The next point I would like to mention is to pay less attention to what the credit bureau defines as financial success and lean towards what you define as financial success. These reporting agencies and credit card companies want you in debt because it generates them substantial income (163 Billion in 2018 to be exact). These companies know exactly what to do to optimize their cash flows. If an account is inactive for a certain period of time (6 months to a year) it will be closed. Also, many credit cards have certain cash bonuses for spending X amount of dollars. To suddenly open up and achieve all of these bonuses would be a major cash drag. Overall there are many different software's that one can utilize to monitor, reflect and adjust one's credit habits. Keep an eye on these platforms on a regular basis and adjust course when necessary.