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Fico and the number 3

Posted by TheChosenOne , 20 June 2009 · 102 views

Somebody asked me the other day about all of my available credit and about doing an AOR (app-o-rama). Of course I told them this was a really bad idea these days, but if they wanted to build up a lot of credit over the course of the next year, I have followed the 3 apps every 3 months rule, and have never 1. had my fico dip, or 2. Received adverse action due to it.

Now heres where I have to tell you, this is very dependant on which fico scorecard you are on, and the age of your file. However, you should be able to tell within the first series of new cards reporting, and as long as you have a decent file with an aged account, this should work for you.

So hows it work? If you limit yourself to applying for 3 cards that report every 3 months, at least on the scorecard I'm on, you do not suffer a fico hit at all. What I have found is that the approvals and the high limits resume after 3 months. The 3 months also gives you time to bump off inquiries, as approval limits will lower with increased inquiries. If a card reports opened in January, you need to wait until at least April to app again. Now, it could very well be 4 or 5 new accounts, but according to the data and information I've seen, this is a very safe number for both fico scoring and account reviews.

The pros: If done right, you can add 12 new accounts to your credit and help out utilization without a fico hit or AA. This means the following year (when you should take a break from applying to let things age), you will have a dozen accounts all solidifying your average age of accounts.

The cons: 1. Don't do this if you plan to apply for a home, car or other big loan. I have always recommended staying away from apps for 6 months before big loan apps. 2. Don't do this if your credit isn't already good/great. You're just going to get a lot of toy credit limits and thats pointless. 3. This is a bad idea if you're trying to get in with a very conservative bank that doesn't like a lot of new accounts. I have found these to be few and far between BUT they do exist.

Here's a great tip: Apply on the last week of the month. Why? Even if you're approved on the last day of the month, they usually report that month as your account open month, which means if they don't report to your credit for 5 weeks, when it pops up its already 2 months old. Avoid applying on the last day because, well these days it seems every app needs to be reviewed by an underwriter and this may take a few days at least, and your account open date is going to be the approval date. Best bet is to app at least 7 days prior to the first of the next month.

I've built a great amount of credit over the past year and a half using this method with no drawbacks other than the occassional denial from a conservative bank for recently opened accounts. Those happen maybe once out of every 10 apps, so I don't mind those denials. Remember to do your research before applying, creditboards is a wonderful place for that, and goodluck!




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