Credit score question..

[David Griffith 2]

Yes I know.. really off topic here. A post below has me pondering some credit questions. I've been told it is better to pay off and close out older credit cards. (Sears, circut city, Macy's etc..) I've also been told it is not good to do that. I am young and trying to keep my credit pretty clean. Any recomendations on this subject? Any other help/tips are appretiated...

 

[Todd Z]

Griff,



When i bought my house I was told the opposite, don't close any thing. You show better credit when you have 30K available with $0.00 balance on your cards. IT shows responsibility. IF you only have 1 card with a 5K limit, it is not as good...



Back in the past it was the other way, I thought also, but when I bought the house I worked with the bank and in 1 month raised my score 20-30 points.....



Todd Z

 

[Gavin Allan]

1. Pay off all debts on time. Do not be late with a payment, ever.

2. Close unused accounts, but don't close more than 2 or three of them every six months.

3. Best yet: Live within your means. Save money. Don't borrow--just pay cash and save big bucks.

 

[LoriMaury Kimbrough]

We bought a house in June. We were told the same as Todd Z, pay them off but don't close the accounts. We were told each closed account could lower your score 5 - 10 points.

 

[gary s]

VERY IMPORTANT :



if you do choose to close an account, ask for verification that you closed the account at your request. this way you have proof that you closed the account and not the lender.

also , in contrast to the posts above, any lengthy unused accounts that you do not use or intend to use should be closed, as available excess credit can have an impact on your credit rating.

 

[Scott Tanner]

todd z is correct... the way they look at all this has changed in the last 2-3 years...

 

[Doug Watts]

Gary, that used to be true, but the credit score (fico) companies have changed the way they are calculating the scores. They are looking at the ratio of used to open credit now instead of just the amount of unused credit. At least, that is the way myfico.com explains it.

 

[EddieS'04]

We havent had a house note in 10yrs. The last three cars were cash buys. We pay off the credit cards monthly. When we do finance anything, it is paid off within 90 days. Our credit score stays very high. If I told you what it is you might steal my ID,LOL. Paying things off ahead of time has not hurt our score.

 

[Rodger Tellefson]

I agree with Doug; Do Not close your credit cards, just pay them off. I was listening to Suzi Orman last night on Larry King Show and she said the same thing. You might check with a credit counselor about closing the store cards though because they are not good for cash advances or anything beyond the store.

 

[David Griffith 2]

Thanks so much for the input guys..

 

[Bob Corning]

I agree with al the information given above regarding credit cards and your credit score - but with one additional thought. We recently took out a small loan at the Credit Union and were provided our credit score as part of the transaction. The lender said, "Your score is excellent." I asked what "perfect" was and when I was told it was about 20 points higher than my score, I asked why. I was told that even though I had no outstanding balances on credit cards and an excellent pay record, the fact that I had a half dozen credit cards (even though I only use 1 and pay it off each month) it affected my score. Too many credit cards (whatever that is) means you have the "ability" to very quickly rack up a lot of debt. But as long as ones credit score is fairly good, none of this affects you on a daily basis anyway.

 

[gary s]

crash, thank you. that was the point i was trying to get out there. to much available credit will lower your credit rating. not such a bad way, but it will lower it

 

[Don Tomczak]

This is a question that I actually feel like I can answer. The answer is it depends. It's a good idea to have alot of open credit line, like 60-90%. However a 'dormant' card is negitive on your report, even though no one will tell you that. When I look at an application that can go either way, aproved or declined, and they have a good a amount of open creadit and a deep credit file, meaning the oldest creit account is at least 12 months old and at least 5 OPEN credit lines, I look for other things, like dormant cards. Even though your report have already removed points for it, I view it as declineable information because it has to be subtracted from your OTB- open to buy- credit line and it shows noncompliance with card user agreements by not using it. My sugestion it make 1 purchase of 10% of you total credit line at least every other year and pay it off over 4-6 months. That shows useage, responsibility in purchases and free income.

 

[Jeffrey Travis]

The big question is? If you want to close some of these dormant cards because you never want to use them, how long will it affect your credit for? Do you drop 10-20 pts for 6 mos, a year? It could be worth it just to know that you do not have an account hanging around out there that you do not monitor very much and could just as easier be hacked as one you use every day.

 

[shawn stonbraker 2]

Crash is very correct. (my wife works at a bank) It's ok to have some credit cards but to many will actually lower your score, for the exact reason he gave. Don also brings up a good point also. If you have them, they have to show use, or they can take you having so many cards the wrong way. Another thing is, don't go applying for cards just to get the free stuff. (thinking you will just decline/cancel the card if it's issued to you) This will also show up on your report and can cause some banks to turn you down. Before I met my wife, my credit was absolutely shot. (13 years ago) (didn't have a real good teaching in money management when I was growing up. Kind-of hard when there wasn't any.) We got it straightened out (used one of those credit repair places) and now my score is actually higher than hers and she's never been late with a payment in her life. So there is hope for everyone.

 

[Don Tomczak]

If you have a dormant card, it robs points from your FICO. Depending on how old the account is, how long since it was used, how much the credit line is, and how long was it actiivlly used for. It make take as few as 1 point per card, to as much as 25 points per card. The amount of points that it takes varies from card to card, issuer to issuer, and on each credit model. For example, if you have a Curcit City that is issued by Citi Cards, a Office Depot card, issued by Citi Cards, and a Staples card also issued by Citi Cards. The Office Depot card and Stamples cards are considered dormant, but you always use your Curcit City card. The Experian model my consider them all active because they are all issued by the same comapny and viewed colectivly. The Equifax modle may take points on the two cards considered dormant and not on the other because they are all viewed seperatly. Where as the Trans Union Modle may consider them all inactive because the same issuer did all three cards and is reporting a dormant card. I know this is all very confusing and, at least for me, is frustrating. The scoring modle is always consistant for each company, but they don't have to ever release any information about it to help consumers improve thier credit score.



It pays to do your homework and know which is teh primary and secondary beuru for your state. Also know who is issuing your cards.



As I after thought I guess maybe I should say how I know what I know. I work for Citi Financial. I work primarily as a loan underwriter, but also review credit acrd applications for all of the cards issued by Citi. I work both with consumer and comercial finances.

 

[Shelby Crane]

Something I don't think was mentioned above. If you were repairing your credit, it might be worth the adverse effects on your credit rating to avoid an annual fee.

 

[David Griffith 2]

All great info.. Thanks guys..

 

[Thomas Rogers]

Ironbar, regarding your comment about avoiding annual fees, I wasn't aware people still got credit cards with annual fees. Yeah, I guess I am being kind of sarcastic, but the last card I had with an annual fee (over 15 years ago), I simply called the company on and said: "I'm going to drop you if you don't waive your annual fee!"...and they did, over the phone, no questions asked.



TJR

 

[Shelby Crane]

TJR, Yes, people with no credit/bad credit do still get cc with annual fees. I had to do this about 10 years ago and as of a couple of years ago, I did the same thing and called them and told them to cancel my cards unless they waived the fee. Two of the four would not and I canceled them. Mind you, I had these cards 8 years or more and had a 700+ credit score when I chose to cancel them.



If I remember correctly, the credit cards that would not waive the fee (they told me to cancel and apply for a new card with them) were First National Bank of Marin and Capital One.