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Question By
RonSMeyer

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Why is having 9 total accounts bad?
I have a poor rating in this category. I have excellent, 100% in everything else. I have 9 total accounts, 3 of which are closed. I pay my bills on time, I live within my means, I don't overuse credit. You would think not having a lot of accounts would be a GOOD thing and would indicate that my financial management is excellent. But for some mysterious they think that is poor. It makes no sense and is just plain STUPID. What is their thinking here? Is it really because I'm not paying enough interest to big banks so they have to downgrade me on something?

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Agree

I am in a similar situation.  One bureau showed 10 accounts.  Just last month we paid off our mortgage - and our score went down.  That was because a 10 year old account was now closed so the age of our history went down some.

We only have 2 credit cards (Discover and a Visa [for the places that don't take Discover]), a HELOC and a three year old car loan that will be paid off before the end of the year (the other car we bought earlier this year was cheap and we paid cash for).  No store cards and no gas station cards.  My score is 799.  I have NO desire to get more cards or, frankly, to play the game any more to try to get the score any higher.  Our rating is already at "Excellent" so 799 or 8-oh-whatever won't a hill of beans difference.  To me.

But I agree that it is frustrating that living reasonable within ones means is considered "bad".  And of course applying for another card to try to increase the number of accounts would hit us as a hard inquiry - which in turn is bad.

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Your life style is actually the best for a person, but alas it is not good for a credit rating.  The fewer good marks you have the lower your score.  The more times they can see that you have been given a loan or credit without any bad remarks the better a risk you are to lend to.  It is similar to the insurance industry.  If you just started driving your rates will be very high, yet if you have 25 years of driving with no accedents then your rates are low.  Or a person who has never had a job, compaired to one who was with the same company for 15 years. So with only 9 things reported they will say you have not had enough time behind the wheel yet to justify lending large amounts, or just getting started with your first job.  

Reply by
RonSMeyer

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I've had 40 years with an excellent, 100%.  credit rating and they KNOW that. But it is still poor to not owe a lot of money to a bunch of different creditors. I still say it is stupid and makes no sense.

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The credit rating system

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was designed by the credit lenders.  It is to their advantage that you have a lot of credit extended, not yours. 

The statistical information that they use to give you a score only counts the last 7 years of your reported history. FICO and others base your score on the last 2 years of activity. on mortgages,  they will base your score on the last 10 years of credit history, which can give you a very different score.  So it doesn;t matter to them that you have a 40 year history with no late payments, that doesn't show up on your report.   Having to few accounts tells them that don't use credit so you aren't a reliable source of income to them. 

When I started rebuilding my credit I was told that the ideal situation is to have an "Available Credit" limit of at least 1 years income, no matter how many accounts that took.  I opened a new account every 6 months or so until i reached that threshold. Use the cards sparingly and pay them off and let them report 0 as often as possible. I use them all by putting them in a rotation and only using a 2 cards at a time for a month and then paying it off so that no accounts are closed for lack of use.  I saw my score go from the low 600's to 800 in a couple of years.

The way scoring models work is by averageing your debt to income ratio and available credit to your balances over a period of time. Usually the last 2 years.  If you have 9 accounts and 3 are closed which they don't like to see.  that leaves the other 6 accounts of available credit, With what you charge each month and the balances you carry compared to what those balances would be if you had double the number of accounts would drop all those ratios,  tremendoulsy Improving your scores. 

The goal here is to have as much credit available to you as possible then show them that you can manage it well, 

Theres a reason they call it "The credit game"  its a numbers game that, once you learn how to play it, can work in your favor all the time. Its to your advantage to learn to play by their rules.  

Good luck

Reply by
RonSMeyer

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Thank you to those who replied. I appreciate your time.

>>>Having too few accounts tells them that don't use credit so you aren't a reliable source of income to them.  When I started rebuilding my credit I was told that the ideal situation is to have an "Available Credit" limit of at least 1 years income, no matter how many accounts that took. <<<

So it sounds like my original assessment is correct. I'm not paying the big banks enough interest so have to downgrade me on something. With the 6 open accounts (1 is a home equity line)  that I have and use, I have well over a years income in available credit so I don't get that the number of accounts should make a difference. 

Anyway I guess it doesn't matter. CA says my score 822 as it is. Still, it is annoying and frustrating to be so diligent and consistent about paying everything on time and then to get marked "poor" for something, that to my mind, should be a GOOD thing.

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