Credit Advice

Have a question? Have advice to share? The combined knowledge and experience of everyone in the Credit Karma community can help you. Enter your question or help others below to get started!

Question

Posted in Credit Scores
Profile Image

Question By
skatardrummer

5 Contributions
0 People Helped
Consolidation loan and FICO categories
So a couple years ago my husband lost his job. We racked up debt trying to make the bills. We separated our finances and mine has been improving. I wrote a nice letter to my credit union who gave me my car loan and asked for a consolidation loan. I explained that I had paid my car payment for almost 2 years on time every month, and that this consolidation loan would halve the amount of time it would take me to pay my outstanding debts and interest. They approved me for more than half what I was asking.

The weird part comes in with the FICO categories. A year ago, I opened a bunch of store cards to places I don't shop and kept them 0 balance so it would reduce my revolving debt and raise my credit score. It also increases the amount of lenders that were willing to take me on, which according to credit karma is good. However, my CU denied me the remaining $7k I asked for on the loan due to "too many accounts opened recently." They said to apply again in a year if I still needed the rest because they weren't willing to risk that much. I thought this was odd, because I thought having lots of available credit with low usage was a good thing.

Well, in the grand scheme of things, in just a few months I've paid a few thousand working lots of extra hours and my credit score has also improved 39 points. But what do you guys think of this category of "too many recently opened accounts" on a credit decision?

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW
All Responses

Results 1-2 of 2Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next
5 Contributions
0 People Helped

Hey

Just so no one thinks I'm heartless, him losing his job was NOT the reason we separated finances. But rereading it, it sounded like that. He just committed to the financial change a month ago and is getting caught up on his bills. No more behind in rent or utilities already. Yay!

Top Contributor
5038 Contributions
1131 People Helped

Your experience is typical and normal. Lenders don't like it when you have a bunch of new accounts as it makes you look desperate for credit or having some type of financial problem why you need to start borrowing so much. Another issue is "debt to income". If you have too many open accounts, you may have most of your "debt to income" used up, not leaving any money left over to pay another account. Just because you have zero balances, the lenders worry that after they give you credit you may max out your other accounts overextending yourself with not enough money to pay all accounts that are due.

Reply by
skatardrummer

5 Contributions
0 People Helped

Hi trying,

Thanks, that made sense to me too. But what I can't understand is why the credit scoring says lots of accounts are a positive thing of this is how people view it. The more open accounts, the lower the ratio usage, the better the score.

The other issue that comes up is "limited credit history." If I've had an account for 2-7 years and paid it faithfully, this is considered "limited credit history." We'll how does anyone in their 20s do anything when they haven't had credit most of their life?

One day I'd like to be completely debt free and it's going to take time to get there. The only thing I don't think we'd ever be able to pay total cash for one day is a house....which requires a FICO score...

Results 1-2 of 2Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW

Reply to this Question

Write your response:
Enter Your Comments

The Credit Advice pages of the Site may contain messages submitted by users over whom Credit Karma has no control. Credit Karma cannot guarantee the accuracy, integrity or quality of any such messages. Some users may post messages that are misleading, untrue or offensive. You must bear all risk associated with your use of the Credit Advice pages and should not rely on messages in making (or refraining from making) any specific financial or other decisions.