credit score question

[gregshin]

i have 3 out 5 credit cards i dont even use anymore with 0 balances for months. the other 2 cards i use in emergency purposes only should i just cancel them? if i do cancel them will it hurt my score?

 

[kranky]

It could potentially hurt your score to cancel them. Best to use them once every 6 months or so just to keep them active.

 

[dullard]

Kranky got it correct.

If they are your oldest cards, cancelling them could harm your score. If you use too much of your available balance during the month, cancelling them could harm your score. If you get rid of lots of positive payments, does it harm your score (I don't know this one)? If you get rid of all your $0 balance cards, it will harm your score slightly.

The ONLY reasons to cancel them are (a) if you can't control your spending or (b) if you think you are in danger of having your idenity stolen (more cards = more possible headaches and more potential leaks of your info).

 

[manlymatt83]

No

 

[Viper GTS]

Keeping them open increases average age and decreases utilization - Both of which help your credit score.

There's really no downside to keeping your credit score up, you never know when you will need it. I had to get a credit check to get my Comcast HD receiver.

:roll:

Viper GTS

 

[MrWizzard]

If I were you I would cancel them. The impact on your credit score is pretty minimal. They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day. Having to many CC open can really hurt your ability to get a loan. Most lenders will assume you will use 10%-20% of your available credit a month. So they will deduct that from your stated income. When that happens it may make them think you cannot afford the loan.

If I were you, I would close them, but that is me. How much credit do you have it you add all those cards together? Other choice is to reduce the credit amount on each card to a much lower amount.

 

[spidey07]

Originally posted by: MrWizzard
If I were you I would cancel them. The impact on your credit score is pretty minimal. They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day. Having to many CC open can really hurt your ability to get a loan. Most lenders will assume you will use 10%-20% of your available credit a month. So they will deduct that from your stated income. When that happens it may make them think you cannot afford the loan.

If I were you, I would close them, but that is me. How much credit do you have it you add all those cards together? Other choice is to reduce the credit amount on each card to a much lower amount.

That is terrible advice.

1) canceling the cards could have a dramatic negative affect on his score
2) Lowering the amounts would make any debt you have a greater percentage of your revolving credit - again lowering the score
3) If these are his longes accounts his active credit history is shortened, lowering the score.

This could cause a hit of 50-100 points causing thousands of dollars per year in not getting the best rates on loans, insurance, etc. Do NOT cancel those cards without understanding the negative impact it will have.

 

[kranky]

Originally posted by: MrWizzard
They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day.

What does that mean?

 

[MrWizzard]

Originally posted by: spidey07

Originally posted by: MrWizzard
If I were you I would cancel them. The impact on your credit score is pretty minimal. They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day. Having to many CC open can really hurt your ability to get a loan. Most lenders will assume you will use 10%-20% of your available credit a month. So they will deduct that from your stated income. When that happens it may make them think you cannot afford the loan.

If I were you, I would close them, but that is me. How much credit do you have it you add all those cards together? Other choice is to reduce the credit amount on each card to a much lower amount.

That is terrible advice.

1) canceling the cards could have a dramatic negative affect on his score
2) Lowering the amounts would make any debt you have a greater percentage of your revolving credit - again lowering the score
3) If these are his longes accounts his active credit history is shortened, lowering the score.

This could cause a hit of 50-100 points causing thousands of dollars per year in not getting the best rates on loans, insurance, etc. Do NOT cancel those cards without understanding the negative impact it will have.

Uh, spidey07 you live in Kentucky, I live in the same city pretty much as the OP. Credit scores work a little differently out in California. The Fair Credit act that was passed a while back.

Your credit score out here is not allowed to affect your insurance rates.

Yes it is true that canceling his cards could lower his credit score. I canceled a card a while back and mine was hit for 10 points it was a card I carried for 5 years.....

Gregshin if you do want to cancel them make sure they are paid off before you do. Try to keep the ones with the longest history. If you really do not want to cancel them then call them up and lower your overall credit limit. But don't do this until you pay them off.

Spidey07 has some valid points but it's worst-case scenario. If you want just cancel 1 and see what happens to your credit score it tends to affect people more who have really high credit.

 

[MrWizzard]

Originally posted by: kranky

Originally posted by: MrWizzard
They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day.

What does that mean?

From what I understand if a loan agency sees that your credit is constantly getting run they get suspicious that maybe you are trying to get loans at other places and they will take that into consideration. To get the best loan have good credit, (obviously). Another very important thing is to be very stable in your credit activity.

 

[SoulAssassin]

Yaaaaaaawn, how many friggin times are people going to ask this question?

 

[Suspicious-Teach8788]

I have 3 cards (Citi, AMEX, and a BoA card), well I technically have a 4th but that's under my parents and it's just an additional card with my name on it.

The BoA card I haven't touched since September 05, but it carries a 10.4k limit on it. I'm guessing I should just leave it as it is. I carry it because it's my one VISA card left and while I've never run into a place that doesn't take MC and Visa, I've been told by someone on ATOT that there have been places that take VISA only

So I guess I'll keep it open even if I don't use it.

 

[Viper GTS]

Originally posted by: MrWizzard

Originally posted by: kranky

Originally posted by: MrWizzard
They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day.

What does that mean?

From what I understand if a loan agency sees that your credit is constantly getting run they get suspicious that maybe you are trying to get loans at other places and they will take that into consideration. To get the best loan have good credit, (obviously). Another very important thing is to be very stable in your credit activity.

What you are referring to is inquiries, & the "soft" inquiries generated by checking your own credit (credit monitoring services & such) have no impact on your score. The ones that matter are the "hard" inquiries generated when you actually apply for credit.

Yes, too many hard inquiries can have a negative impact on your credit but that is usually a very minor impact (and although they remain on your report for two years they really don't matter much after 6 months).

Originally posted by: MrWizzard
If you really do not want to cancel them then call them up and lower your overall credit limit.

Absolutely the opposite of what you should be doing. Utilization plays a far bigger role in your score than inquiries, you absolutely do not want your limits lowered. There is no downside to high limits. I consider $100K to be a nice starting goal for total TL's, but I'm borderline creditboard freak so YMMV.

Viper GTS

 

[kranky]

Originally posted by: MrWizzard

Originally posted by: kranky

Originally posted by: MrWizzard
They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day.

What does that mean?

From what I understand if a loan agency sees that your credit is constantly getting run they get suspicious that maybe you are trying to get loans at other places and they will take that into consideration. To get the best loan have good credit, (obviously). Another very important thing is to be very stable in your credit activity.

I don't see a connection between running someone's credit (called an hard inquiry in the sense you mentioned) and keeping a credit card open. An open credit card account is not going to affect the number of hard inquiries on anyone's record.

 

[MrWizzard]

Originally posted by: kranky

Originally posted by: MrWizzard

Originally posted by: kranky

Originally posted by: MrWizzard
They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day.

What does that mean?

From what I understand if a loan agency sees that your credit is constantly getting run they get suspicious that maybe you are trying to get loans at other places and they will take that into consideration. To get the best loan have good credit, (obviously). Another very important thing is to be very stable in your credit activity.

I don't see a connection between running someone's credit (called an hard inquiry in the sense you mentioned) and keeping a credit card open. An open credit card account is not going to affect the number of hard inquiries on anyone's record.

What I mean is canceling your CC and having a lot of hard hits both can lower your credit score. But in my case both were minimal. But that was just in my case.

 

[MrWizzard]

Originally posted by: Viper GTS

Originally posted by: MrWizzard

Originally posted by: kranky

Originally posted by: MrWizzard
They usually say that to try to scare the customer into keeping their account open yes it can affect your credit but so can running your credit every day.

What does that mean?

From what I understand if a loan agency sees that your credit is constantly getting run they get suspicious that maybe you are trying to get loans at other places and they will take that into consideration. To get the best loan have good credit, (obviously). Another very important thing is to be very stable in your credit activity.

What you are referring to is inquiries, & the "soft" inquiries generated by checking your own credit (credit monitoring services & such) have no impact on your score. The ones that matter are the "hard" inquiries generated when you actually apply for credit.

Yes, too many hard inquiries can have a negative impact on your credit but that is usually a very minor impact (and although they remain on your report for two years they really don't matter much after 6 months).

Originally posted by: MrWizzard
If you really do not want to cancel them then call them up and lower your overall credit limit.

Absolutely the opposite of what you should be doing. Utilization plays a far bigger role in your score than inquiries, you absolutely do not want your limits lowered. There is no downside to high limits. I consider $100K to be a nice starting goal for total TL's, but I'm borderline creditboard freak so YMMV.

Viper GTS

Why would you need 100k-credit limit? What do you say to the loan people when they give you a sub par loan because of the assumed 10% of your credit limit spent each month? You can only explain away so much with them.

You have some valid points but I guess it just depends on how someone uses their credit. I pay my CC bills off fully every month. That probably makes the position I am coming from a little clearer.

 

[shocksyde]

MrWizzard IS GROSSLY MISINFORMED. DO NOT LISTEN TO HIM. GO TO CREDITBOARDS.COM TO GET YOUR HEAD STRAIGHT!

 

[kranky]

I think the issue is that lenders don't assume you use 10% of your credit a month. They look at your actual credit report, and can see exactly how much you're using.

Part of the strategy is playing games with the FICO scoring system. FICO does not penalize you for having a large amount of available credit. But the amount of credit you use (in percentage terms) does affect your score. Let's say you have $20,000 in credit lines (CLs) and are using $5,000. That's 25% utilization. But if you owe the same $5,000 but have $100,000 in CLs, now you only have 5% utilization which is going to be better for your score than 25%. Same dollar amount in debt, but a much smaller percentage of your available credit.

I agree that hardly anyone NEEDS $100,000 in available credit, but the fact is the more available credit you have (within reason), the better the chance your utilization will be low and therefore your score will benefit.

 

[shocksyde]

Originally posted by: kranky
I think the issue is that lenders don't assume you use 10% of your credit a month. They look at your actual credit report, and can see exactly how much you're using.

Part of the strategy is playing games with the FICO scoring system. FICO does not penalize you for having a large amount of available credit. But the amount of credit you use (in percentage terms) does affect your score. Let's say you have $20,000 in credit lines (CLs) and are using $5,000. That's 25% utilization. But if you owe the same $5,000 but have $100,000 in CLs, now you only have 5% utilization which is going to be better for your score than 25%. Same dollar amount in debt, but a much smaller percentage of your available credit.

I agree that hardly anyone NEEDS $100,000 in available credit, but the fact is the more available credit you have (within reason), the better the chance your utilization will be low and therefore your score will benefit.

QFT

 

[MrWizzard]

Originally posted by: shocksyde
MrWizzard IS GROSSLY MISINFORMED. DO NOT LISTEN TO HIM. GO TO CREDITBOARDS.COM TO GET YOUR HEAD STRAIGHT!

This may be true, but everything I have stated here I was told by loan officers in California in the last month. Seeing as I am trying to buy some property. Go ahead and go to Creditboards.com, they may have some valuable insight.

 

[Viper GTS]

Originally posted by: MrWizzard

Why would you need 100k-credit limit?

To hold on to your money as long as possible without tanking your credit score.

Even for someone like you who pays in full every month higher limits are still helpful. Let's say you charge $1,000 a month on your credit card. You charge everything you possibly can for the cash back. Food, gas, utilities, etc. Now when your statement closes each month only a couple pieces of information get reported:

1) The credit limit (for most cards)
2) The statement balance
3) Whether or not the account is in good standing (30/60/90 late, etc).

Now given only those pieces of information what's to differentiate between you, the responsible PIF consumer and your neighbor with an equal credit limit and $1,000 balance who pays just the minimum every month (and charges something else to keep his balance at $1,000)? Absolutely nothing. Based on your credit reports alone a lender would not be able to tell you apart.

The solution to this of course is to pay off the card before the statement closes, showing a $0 balance on your statement date. Whoops, then you look an awful lot like someone who has a credit card but never uses it (which shows no ability to properly use credit). To make matters worse you're now parting with your money much sooner than you should have to.

High credit lines allow you to maximize the potential of credit without hurting your utilization (thus keeping your scores up). Having $1K in revolving debt with $99K available looks great to lenders.

What do you say to the loan people when they give you a sub par loan because of the assumed 10% of your credit limit spent each month? You can only explain away so much with them.

This is completely false.

Viper GTS

 

[43st]

I always thought leaving them open was the best course as well. Then I had an ID theft with one of the cards that I hadn't used in over a year... Since then I've closed all accounts. It didn't effect my FICO score at all. FICO, I believe, is more about payment consistency than having open lines of credit.

 

[shocksyde]

Originally posted by: MrWizzard

This may be true, but everything I have stated here I was told by loan officers in California in the last month. Seeing as I am trying to buy some property. Go ahead and go to Creditboards.com, they may have some valuable insight.

Being a loan officer doesn't make you a credit expert. All he knows is your score needs to be above XXX and you need to make $XX,XXX a year to qualify for his product.

Myfico.com also has great information. Why? Because they're the company that tallies your score. And just recently they've started educating people on the factors that go into a credit score. Please read up before you give people bad advice, such as your loan officer did.

I'm trying to attack you personally, if anything I'm attacking your loan officer. It's not your fault he's an idiot.

EDIT: Oh, and I can see it coming already, so let me say this: I am not a credit expert, either. I know. But I have done my research.

 

[halik]

How does utilization work when it comes to unlimited Amex cards? I've got an amex gold card that has to hard credit limit... whats the utilization on that?

 

[kami333]

Originally posted by: 43st
I always thought leaving them open was the best course as well. Then I had an ID theft with one of the cards that I hadn't used in over a year... Since then I've closed all accounts. It didn't effect my FICO score at all. FICO, I believe, is more about payment consistency than having open lines of credit.

35% based on payment history vs 30% based on amount owed (of which utilization is a part of). link

There's so many variables to consider that just because your score didn't go down doesn't necessarily mean that someone elses won't.
How many accounts?
How much were the credit lines?
How many other types of credit are there?
How long is the total history?
How long was the history of those accounts?
etc etc