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Nov 03, 2008 -- More lines of credit better than less in current climate
With the high rates of credit card default, the banks are in a panic trying to close down stale credit card accounts that haven't been used in 24 months. That's a double whammy to you: It reduces your available credit and the length of the history of your credit. Both criteria can really hurt your overall credit score.
So the key is to use all your credit cards twice a year. Simply mark a day on your calendar, make a small purchase of $5 or less and then turn around and pay it right off. This keeps your account active and raises your credit score, plus it helps make it less likely that your account will be closed.
In related news, the banks are also redlining by shutting down accounts based on zip code. This practice is illegal -- though no one seems to be stopping it. The banks must justify for your individual situation why they're closing your line or reducing it.
The bottom-line is this: It's important to have more -- rather than less -- lines of credit right now. Have a backup card if your main one gets shut down.
Unfortunately, Clark won't be able to answer any questions submitted via commenting. If you have a question, please try posting it to our message boards.
Many people are told by mortgage professionals that opening and using a credit card will increase FICO score. According to Credit Technologies (the company that I as a mortgage professional use to pull customers credit) it take 6-12 months of history of a credit card before it impacts your score. And the ratio between credit limit and balance has a huge impact on your score. I do not recommend for anyone to open a credit card or any other type of line of credit to increase their score. Pay your bills on time, do not allow collections to hit your report and if they do, pay them off and have the creditor remove them completely from your file.
Pay Em Off, Close Em Out
I also disagree with Clark about this subject. I've had good payment history with two credit cards for two years and did not receive any increase in my credit score. My mistake was not paying off the balances. If you dont have credit cards, there is a zero percent chance the banks can make money off you. If you do have CC, you may increase your credit score, but its the CC companies that will make money off of your efforts. Dump Dept, build and emergency fund and dont worship at the alter of FICO
Disagree with Clark about Credit Cards
Clark may be right about the technical scoring of your credit rating, but closing credit cards is always a good thing. Most people do not pay off their credit cards and the banks ARE making off of you in finance charges and late fees. If you have any history of not paying off your credit cards or paying them late, guess what? Your credit score is already getting decreased. Pay them off and close them out. If you think I'm wrong, then you are the less-than 1% of people who don't pay finance charges and late fees. Credit agencies are not non-profit organizations created for consumer convenience. They provide convenience, but they are and will make money off of you. I don't care what benefit there is for your credit score. If you're not disciplined enough to pay it off, then don't pay it out.
Amex cancelled credit card
I am still very angry with Amex. Got a letter saying that I have a low credit score, late payments etc. I have never been late and I have a very good credit score. I called them and all I got was the run around. I could care less about having this card, I just don't want this cancellation to affect my credit score. I owe $270, so my plan is to send a registered letter with check saying that I want my card cancelled at my request. Never again will I use Amex.
credit card account closed
I had an AMEX account that I paid off. I enquired about balance transfers, then I got a letter stating my credit limit had been reduced to 19,300. Which was always my credit limit. A couple months down the road I find the account is closed due to debt / income ratio. They send me a letter stating the exact opposite. Now I have 19,300 less credit and I'm sure my credit score will suffer even though I've never been late on any payment. Please help!
amex and costco
Amex has canceled our card after we paid the balance in full every month for 2 years or so. This conveniently happened just before we were due our annual refund from Costco. How convenient! and what a ripoff. Costco says they can do nothing - but they have had numerous complaints about this practice.
Lines of Credit
I have just gotten my credit score which is 758 but I have $22,000 in revolving credit that I have not used since 2002 nor due I still have access to them. Should I close them both out? Will it bring my score up? I have 3 other lines of credit that I use. Thanks.
Company cancelled credit card after we paid it off
American Express canceled our credit card saying we had to much debt. We paid off the card and they promptly canceled it. They had the gall to say that if we did not pay our bill they would start legal action. We had our card through Costco and will now ned to get a costco membershgip card without the American Express credit card. Theu raised the interest rate to 14%. We have decided to not carry any balances more than a month as the hgiher interest rates they are now charging make it highway robbery!
Closed Cards, but high credit score
Over the last 6 months I have had two accounts closed due to non-use. However, my credit score on both Quizzle and CreditKarma are very high (I understand that their scores are not the actual FICO scores, but are related). My question is this; if I have a high credit score, do I need to a new CC account, to replace the recently closed ones, to pad my score?
credit cards numbers to have
thank you we just renewed one of our cards that we have not used since 2000! without your advice, I was going to close it.
I see this
This is happening to us. We have had a couple of accounts closed by the companies because we have not used the cards in more than two years. I hope this does not lead to problems somewhere down the road. But, if we were going to close an account, wouldn't this be the time to do it. I thought that it didn't go against your credit score if you closed an account that was more than two years old.
More lines of credit?
You are assuming people are paying off their spending every month, but we all know most people that have multiple cards have greater chance for larger debt. As a lender, why would I want to risk lending money to someone who has the potential to jumping into even more debt the next day. How many cards is enough anyway? Should I run out and get more cards and make small purchases once a year to boost my credit limit?
RE: lines of credit
If some lines of credit are closed on you it makes what you have borrowed closer to your total available limit. The closer that a person is to their limit, the less attractive they are to lenders. To have really good credit you have to use a small portion of what is available. Its kinda like a dance... and one you do well if you want to be able to borrow for a home or something big with a lower percentage.
