I didn't know they had detailled reports on our credit history, too. Apparently we both have 100% payment history, 0 derogatory marks, an average age of credit history of 5 (wife, 5 months AMEX + 5 months VISA) and 3 months (me, 5 months AMEX + 1 month VISA), respectively, and we both have two accounts each.
This is the biggest detriment. 5 _years_ is usually considered the minimum "decent" credit history. And, importantly, that number is calculated against only OPEN account, not closed accounts. For example, my current age/history is only 4 years, even though I've had a credit card for almost 20. That's because I (accidentally) let my oldest credit card account get cancelled from lack of use and because I've opened several new accounts in the last year. The lesson: don't close old credit cards and keep them active.
I do, however, have three credit inquiries on my account that are classified as hard pulls, one of which is actually Charles Schwab back from June 2016. Neither the auto loan nor the Amazon credit card are listed, though. My wife only has one credit inquiry on her credit history.
Three hard pulls is a detriment, but they will stop affecting your score 1 year after the date of the pull. Don't apply for new credit unless you want it.
From what I understand I can really only work on one area right now: my available credit. The detailed report says I'm using a total of 52% of my available credit on both my credit cards combined. Apparently, that puts me in the red category and I should try to use anywhere between 0-29%. This apparently also has a rather high impact on credit score. Should be an easy one though since now that we've started paying our cards off every two weeks instead of once a month after the statement was in there shouldn't be any significant amounts left on the monthly statements.
It's odd that those are listed as credit card debt though, from my understanding they're only debt if I fail to pay them off and carry them over into the next billing cycle but apparently I got that wrong o_O I will try and increase the credit card limits though, that seems like a smart thing to do.
The best place to have your load is between 5-9%. 0% is bad, >9% is bad. And it's not just funds that are over 30 days old, it's your total current balance. Your creditors report your balance vs your limit monthly (or maybe even more often). This is actually good if you are paying your total off every month, as it looks like you are using credit even though you technically aren't.
If you are paying off monthly and still going above 10% you need to either get more cards, or ask for a credit limit increase. Aim for whatever revolving credit limit allows you to stay under 10% through normal monthly usage. When you buy the house, it will be very important to keep your usage below 10% as most lenders will recheck your credit the day before closing and if your score drops due to over-usage the deal may fall through.
In general, don't do anything to lower your credit even after getting a mortgage approval because they WILL check it again even after approval.
The other thing that worries me are the credit inquiries. Let's say I do get a car loan and make my payments every month. In theory, that should increase my credit score, correct? I will, however, get another hard pull on my credit inquiries in that case. From my understanding the high impact payments history should counterbalance the low impact credit inquiry, correct?
Hard inquiries only affect your score for one year, and their effect diminishes even in that year. Don't sweat inquiries if you are actually trying to get credit. Also, if you are shopping around for a loan and get several inquiries in the space of a couple days they only count as one. So if you do shop around, figure out the lender candidates and apply all on the same day.
Fun fact: apparently the number of accounts is also a downer for us. We only have two accounts each, which puts us in the red category. In order to turn that one green we would need at least 11 accounts, which means another 9 credit cards each. This can't be right, can it?
That is correct. I have 15 accounts, and that's only considered fair. It's about history. The more history, the better. However, don't do apply for 10 more credit cards, as that won't help. The score considers the type of account as well. You need a mix of loan types.
Your biggest issue right now is
1.) extremely poor history (5 months) -- this affects both your "length of history" factor and your "payment history", with the latter being the biggest single factor.
2.) not enough accounts or TYPES of accounts.
You said you were looking to buy a car. When you do, if you still need to improve your score, finance it even if you have the cash for it. Even if it makes the car much more expensive. But also make sure the payment is <5% of your gross, as a high car payment will also hurt your chances for a mortgage. Lenders typically will only allow housing debt (mortgage, tax, insurance) payments of up to about 28% of your gross with total debt payments of 36% of your gross.
A high interest car loan sucks, but a high interest mortgage sucks at least an order of magnitude more. It will establish some history and variety to your credit. Or get a student loan or something other than just a credit card (revolving debt) to establish some history.
Like I said in my last post, a good target is 740 average. That or above gives you good rates on a mortgage, below that gives you worse rates.