Question for Credit Score Experts

[Jalva22]

How many credit cards are too many? We have good credit, no problems in the past or anything. But we ran up a balance on a card to pay for some tmj dental problems I have had. I have been paying off the balance by transferring it to a zero interest card, then when the intro period is about to expire, transferring it to a new zero interest card. The debt is now manageable, under $3,000. Never late on a payment on it or any other debt. I anticipate having this balance paid off within two years (and again, it's at zero interest).

I now have 4 cards. One is a gm card which I use to get the 5% rebate and pay off every month. One is an old card which I don't use, but which has a much higher credit limit than the others. One is a discover card, which had the balance this past year. The fourth is an amex which will carry the balance now. I hate to close the high credit limit card, because losing that available credit could hurt my credit score. I also would like to keep the discover card to use for the rebate once my gm rebate is used up for the year. Will having 4 cards, but only 1 with a balance that isn't paid off every month, hurt my credit score? If I should close one card, which should it be?

 

[oogieboogie]

I suggest you pose this question on http://www.creditboards.com
It's an excellent forum specifically for credit, credit repair, credit management, etc. You'll find good answers from people who know the ins and outs of credit.

 

[MyGoofy26]

Shouldn't hurt your score. Actually having the others with zero balance will help. Your utilization is a HUGE factor on your score - so if you have a lot of cards that are close to maxed out, then it'll cause a huge drop. If you're only carrying a high balance on one, and the rest are at or close to zero your overall utilization will be down therefor helping your score. I hear 30% utilization is optimal for best scores.

 

[LIFERBABE]

Will having 4 cards, but only 1 with a balance that isn't paid off every month, hurt my credit score? If I should close one card, which should it be?

Im no Suze Orman, but I have a pretty good understanding of the credit scoring system. I've also learned from some mistakes I made trying to boost my score, like closing accounts.

I would keep all the cards open. If you choose to close one, keep the oldest card open. You get more points for maintaining long term accounts.
I agree with Mygoofy26, utilization is a major factor. It's really not how many cards you have, it's how you use them. If they are all maxed out then your score would decrease. Your balance is also averaged over your available credit lines, so carrying a large balance on one card and closing other hi limit cards could skew your numbers and decrease your score.

I like to say High Limit+Low Balance=High Score. That is if everything else is in order and paid on time. The exception to this is when trying to qualify for a Home Mortgage and they look at more qualifying factors and may have other requirements than just a good score.

 

[NeverBeentoDisney]

I have also heard that you should not pay your balance off every month that it is more helpful to your score to see somewhat of a balance every month. Even if it is only $50. This way they see they you are utilizing your credit but not maxing it out. I read in the newspaper and saw a television show that the credit card companies think of people that pay their card off every month as dead beats. They are not making any finance charges off of you and you are not really utilizing your credit. I keep a balance on each of my cards every month and it has risen my credit score at least 50 points in the last year or so. I only keep like $100 or $50 on them though and I always pay way more than the minimum balance.

Hope that helps. But do check out creditboards.com they are really helpful over there.

 

[DisneyBill]

Length of credit has a big part in your beacon scores, sounds like maybe you've opened several cards chasing that zero/low intro rate. Time with accounts open will eventually level this. Also, sometimes FICO will state the dumbest things about the number accounts that an idividual holds, and they include, get this, closed ones in the total count. Best advice is not to worry about it, use credit if you must wisely. One other thing that was brought up about carrying a small monthly balance is, CC companies don't necessarily report balances at statement closing, but usually about a week before.

 

[ruebeesoho]

I work for a large credit union in their loan department. It isn't necessarily the number of credit cards you have. The main factors driving credit scores are late payments, charge offs, collection items, and the ratio of balances to credit limits. Most company's would rather see you have many cards with balances at less than 50% of the limit (ex. $5000 limit on cc with a balance of $1000-2000) than see you have 1 or 2 cards with $15000 limits all at or near their max. We all play the balance transfer game for those promotional rates and think I'll close the others and transfer the balance all to one to have just the one payment, but it really ends up hurting your credit in the long run. Also don't rush to close any cards, it doesn't hurt your credit to keep them open it'll actually help. Good luck. Hope this helps some.

 

[DisneyBill]

I didn't think of this last evening, but you could go to www.myfico.com and purchase one of your 3 fico scores for 12.95, and use their "what if" tool to see what affect closing one or more, opening another, paying off, running up, etc will have on your score. Your report will also give you option to view the top negative and top positive issues with your score.

 

[Buttercup26]

Don't close any credit card accounts. Closing them actually decreases your credit score. Keep them open, even if you don't use them. Although, it's actually better to use them all occasionally then to not use them at all. Creditboards.com is a great resource.

 

[PaulaMurf]

I run a mortgage company, and this is the most useful info I ever got!!

1. 30% rule - Never have more then 30% of your balance in use on any card. It is better to have multiple cards with less then 30% balance then fewer open lines.

2. Do not close accounts that are over 24 months old, if you do,you will take a 50-60 point hit the month it gets reported closed.

3. Do not open new lines of credit, instead have the lines increased on the cards you already have. (Unseasoned lines lessen scores by approximately 30-50 points & by unseasoned I mean less then 6 months.

4. The computers that compute your scores weigh most heavily the last 12 months, then the previous 12, so 1 30 day late on a minor account can cost up to 100 points if it is recent.

5. Make sure that accounts are being reported as R (Revolving) and not I (Installment) unless they really are, also, close ANY accounts with Household in any of its formats. For some reason, Household uses a code with your account number that is read the same way as debt management services and often will reduce your score substantially.

Feel free to PM me if you have specific scenario questions on your credit, I do lots of counseling for buyers, so I would be HAPPY to help!!!

Paula in CT

 

[Jalva22]

Wow! That's some great info, Paula! During the past year, I have refinanced my mortgage to get a lower rate (May) and purchased a new car (July), and also the transfer to the new card (Nov). I assume the 2 new notes (with the home loan and car loan retiring older notes) and 1 new card have probably given my credit score a hammering. The positive side is I will not be needing a new mortgage or car loan for at least 3-4 years, and hopefully not even then. No late pmt's, no debt problems, no closed cards at least. I assume my credit score must have been pretty good starting out, though, to be able to refinance, etc.?

 

[tink2dw]

That depends on the program they used. Alt-A or subprime. you can refinance with a 500 score But you won't the same rate as the guy with a 700 score. He will qualify for a 1.1 rate while you could get 5.95 rate.

 

[LIFERBABE]

Free credit report details announced
Consumers will be entitled to one free credit report each year beginning Dec. 1, using a Web site called AnnualCreditReport.com, the nation's credit bureaus announced Tuesday. Consumers can also call a toll-free number or mail a written request.


FREE CREDIT REPORT INFO