We always advise our clients (and pretty much everyone we talk to) that having strong credit scores will require you to have some credit cards/revolving credit. We recommend that consumers have 3-5 of these revolving lines. When someone has lower or “challenged” scores, it’s important to consider obtaining these essential revolving lines of credit. We will often suggest that a client applies for SECURED credit cards rather than traditional credit cards until we have been able to help them improve their scores.
And this is where the timing becomes a factor…
Although these credit cards are a necessary component of higher credit scores, when the tradelines are initially opened, it is VERY common to see the consumer’s credit scores decrease initially. The “hard inquiry” and the brand new line of credit causes this, but it is temporary. We have seen consumers drop 30 points for a 4-6 month period. However, once the tradelines are opened, used regularly, and paid on time, credit scores will begin to soar.
Our function is to educate you on how to build your credit scores the right way and in the initial stages, the new activity can cause a score decrease prior to the big increase that we are expecting. This is common and should not be alarming. However, consumers who are attempting to obtain a home loan should definitely discuss this with their lender. We can help to communicate this information as well – we talk to lenders and Realtors all of the time. Remember, credit is fluid and often goes backwards in order to go forward. Timing is everything.