USA: Build credit score with second credit card - no history

Question

I am new to the U.S. and therefore have no credit history at all. I am employed here and my salary is good. I want to build credit history and therefore opened a secured credit card which I use responsibly (<= 10% utilization per month) since 2 months.

I found out today, that Citibank is offering a credit card for non residents based on a letter of employment which includes my salary. Still, they will do an inquiry on my credit score, if I apply for this card but it is very likely that it will get approved based on my salary.

I am wondering now, if it helps my credit score to open up a second credit card which I will use the same way (<= 10% utilization)?

My goal is, to have a good score and a good credit history. I do not plan currently to get a loan or something similar but I want to be prepared for the future.

What are the general effects on my score? I know, it will a first drop a bit because of the inquiry. But what next? Will it be higher because of two cards? The utilization in total will be the same.

Is a second credit card a good idea with a limited history and does it help build my score?

Update

I got approved for the CC from Citibank based on my letter of employment. Will update as soon as my score is updated.

Update 2 After my first statement from my new credit card has been posted, my score went up by 37 points. Everything worked as I expected.

Answer 1

There are several factors that impact your credit score, and some are weighted to be more important than others. These factors are:

• Utilization (what % of credit you use) - high importance
• Payment history (do you pay on time) - high importance
• Derogatory marks (collections, bankruptcy, other bad things) - high importance
• Age of credit (how long you've had credit, weighted by account age) - moderate importance
• Total accounts (number of different credit items) - low importance
• Number of inquiries (in last two years) - low importance

Of these items, simply opening another account will directly impact utilization, total accounts age of credit, and number of inquiries. The other two items will only be impacted if you fail to pay on time. So let's look at the four items that will change:

• Utilization - This is the only 'high importance' item that will change from opening a new account. Credit bureaus look at both per-card utilization and total utilization (sum of balances divided by sum of available credit). We don't know exactly how the two are used or which is more important, so assume that both will count. We also don't know for certain if utilizations are treated as continuous or discrete values, but I have generally seen them represented as "buckets" where 0-9% utilization is the best score, followed by 10-29% being pretty good, and going from there. If you plan to keep both at sub-10%, you'll be fine.
• Age of credit - This is calculated as (sum of each account) / (number of account) to get a value, in months. So adding a new account will dilute the impact of older accounts and the effect of dilution is magnified when you have fewer accounts. As you get 20, 30, 40+ account, a new account will have a much more marginal impact than moving from 1->2. However, if your first and only account is only a few months old, the impact will be minor and will actually help mitigate the impact of future credit lines being opened. The ranges for this value are (in order of worst to best): <2 years, 2-4 years, 5-6 years, 7-8 years, and 9+ years.
• Total accounts - you'll be going from one to two. One is strictly better than two, but once again it is believed that credit agencies use "buckets" to group the number of accounts you have, and I have seen the range of 0-5 accounts being labeled as the worst rating, so 2 would not directly make a difference, but it would make it easier for you to move into the next bucket by being closer to that boundary.
• Number of inquiries - This is also minor and anything between 1 and 3 is considered relatively benign. They disappear after 24 months, so if you're not planning on doing a lot more account opening that will create more hard inquiries, you're fine.

In short, your situation would most likely be helped by opening new lines of credit. In fact, I would argue that you should try and establish as many entries in your credit report as soon as possible in order to capitalize on the lower impact on age of credit and the greater value that it will return over time.