Ask FICO: Number of Total Accounts and Loan Extensions for the Holidays? Answering Your Questions
, by Tom Quinn
Ask FICO is a Q & A column where our credit scoring expert, Tom Quinn, answers common credit score and credit-related questions that you have. Post your questions on our Understanding FICO Scoring and General Credit Topics threads on the myFICO Forums.
Question 1: What's the ideal number of total accounts?
Some forum members mentioned that other credit score sites will sometimes share information on the "ideal" number of total accounts you should have on your credit report. These readers wanted to know if there is an "ideal" number of total accounts that holds true with FICO® Scores.
When seeing a reference to a credit attribute like "Total Accounts" it's important to understand how it's calculated. For example, does it include all types of accounts such as revolving, installment, open-ended or all reported accounts no matter their status (such as active, open, closed, inactive)? I know I was surprised by the high number of total accounts presented on my own credit report summary by some of these sites. I discovered that several inactive and closed accounts were being included in the calculation
Generally speaking, FICO® Scores focus more on how you are managing your credit accounts versus looking at credit attributes like the total number of accounts reported. How many accounts were recently opened, how many accounts have balances and the payment history on those accounts are examples of credit attributes our research has found to be more predictive as compared to the total number of accounts.
In short, there is no optimal total number of accounts value within FICO® Scores.
Question 2: I need money for the holidays. Is requesting a loan extension a good idea?
With the holidays coming up, gift lists and holiday plans are being prepared and many of us are thinking about how to pay for all the holiday festivities. Cash, checks and credit cards are potential options - each with their advantages and disadvantages.
I have seen dialogue in the FICO Forums about the idea of asking your lender for a loan extension as a way to get extra cash reserves. In theory, this would enable you to skip a couple months of installment loan payments and allowing you to use that loan payment amount for other purposes - like holiday shopping.
Before pursuing a loan extension, it would be prudent to think through this option:
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Remember the adage "there's no such thing as a free lunch" and that holds true in this situation. The lender would likely add the skipped loan payment(s) to the end of the loan which may increase the total interest fees paid over the life of the loan.
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Also, the lender will likely impose a fee to support the loan extension request and those fees can be quite steep. Make sure you interact with the lender to understand all possible fees before you go forward with the loan extension request.
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Understand how the lender will report the loan extension feature to the credit bureaus. Some lenders may report the skipped month as a 30 day past due which could have a negative impact on your FICO® Scores. Others will continue reporting "as is". Get informed by contacting your lender and letting them know what you want. You should gather information about their credit bureau reporting practices.
While the holidays are a time of giving and celebration, be careful to not overextend yourself financially, which can result in negative impacts on your financial health over the longer term.
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Tom Quinn is the Vice President of Business Development for myFICO and has over 25 years of experience working with consumers, regulators, and lenders regarding credit related questions and initiatives.