Shoud I activate a new credit card?

[karensi]

I have been working on raising my credit score and have been able to raise it from low 600's to high 600's - low 700's by paying off alot of debt this past summer.

I had a Chase Visa card that had been closed about a year ago due to "inactivity".
Chase has just sent me another card (not sure if the # on this new card is the same as the # on the old, closed one) with a $2000 limit.
I'm guessing they did this because my credit score is better now . Anyway, I'm thinking if I activate it then that will raise my debt to credit ratio by $2000. But don't know if there is a reason why I shouldn't activate it?

I don't really need the credit card but if it would help raise my score (by raising debt to credit ratio) then I'll activate it, but maybe it would be a negative thing to activate another card .

Right now I have 6 active credit cards that I rotate using each month and pay off the balance in full at the time the payment is due. Maybe more than 6 would be a bad thing My goal right now is just to raise my score as much as possible.

Any suggestions?

TIA,

Karen

 

[disneyfreakk]

So Chase just sent you a new card without you having to ask? That's odd, especially with Chase. I would call them and ask if the card is a new account or just a new card for an old account.

If its a new account then that would drop your score due to average age of accounts. However, if its a new card for an old account and you get to keep all of that history, then go for it!

 

[GoldieSaysMeep]

First I would call them and see what’s up. Is this the same old account? Is this even a card you can activate (ie. did they just send you the card in error thinking your account was still open?)

If it is the old account, activate it. Having open credit lines, esp. older ones, that are being paid properly is a good thing.

I have 13 old accounts, most of which I don’t even have the cards for anymore or get statements for anymore. The only time I ever close unused accounts is if they implement an annual fee. I only have 3 accounts that I use/have cards for/carry balance on. The last time I pulled my FICO it was just over 750. I just got really mad at Bank of America because they changed my terms and paid ½ of that balance off so I suspect next time I pull, it will be higher (unless they balance chase me).

If it is a new account, make sure you know what you are getting into. Make sure there is no annual fee, etc.

Then, if it were me, I would probably go ahead and open it. All well aged accounts have to start somewhere. Yes, having new accounts on your report will hurt at first, but as that account ages, it will give you more available credit and if you are using it responsibly, or not really using at all, eventually it will help you.

Sometimes, new credit is worth it in the long run. For instance, my fiance just opened a new account with a $4700 limit to transfer a balance. There was no BT fee and he will be able to go from paying 22% interest to something like 3.99% for the next 12 months. The “new account” will hurt his score at first but over the next 12 months he will be able to destroy that debt he transferred, all while paying less interest, which in the end means more cash in his wallet AND a better credit score as he will be out of debt much faster.

You have to open new accounts to get more credit. The more credit you have with the less utilization, the better. The key is not to run up the balance on it. Try not to use any more than 20% of your available credit.

 

[BrettS]

I think you really need to call Chase and figure out what's going on. It's pretty much unheard of for a bank to just send you a credit card without you applying for it... most likely it's for another account that you already have open... worst case, it's a case of identity fraud and someone else applied for the card in your name.

Also note that if it is a new card, as far as your credit report is concerned it's already a done deal whether you activate the card or not. The account is already opened and will be reported on your credit report even if the card is never activated. Activating the card simply allows you to use the card.

As far as whether this would be a good thing or not, you're right that additional credit will help your overall utilization... and if this will help get you under 20% then it might be a very good thing for your score (if you're already under 20% then it probably won't affect it as much). New accounts typically lower your score slightly, but as you said, the additional utilization will probably outweigh the slight decrease for the new account.

 

[karensi]

Thanks everyone, it's always good to get advice from the Dis budget people.

Anyway, I called Chase and it's a new card for an old account. I asked if it was the acct that had been closed due to inactivity and was told "no, this was a different account", which could be because I think I remember having 2 Chase accts, just didn't use them.

So I did activate it. It's an "old" acct, so it will be a positive thing on my credit report.

I was once told that the credit reporting agencies (those that determine your credit score) like to see that you are using 2 or 3 cc's per month. So that's what I do. I use 2 different cards per month, pay off the balance when the bill comes, then rotate the cards and use 2 others for the next month, pay off balance at time of bill, etc.

I have been wondering though, if the cc companies hold it against you if you pay off the balance in full every month, as I have been doing. They have such convoluted rules you never really know what they want in order to raise your score.

Anyway, thanks for the help/advice

Karen

 

[bumbershoot]

I have been wondering though, if the cc companies hold it against you if you pay off the balance in full every month, as I have been doing. They have such convoluted rules you never really know what they want in order to raise your score.

Anyway, thanks for the help/advice

Karen

The CC companies don't make as much money off of you if you pay off your balance. That's why so many people who do just that are getting slammed right now with halved limits, closed accounts, etc.

With the score, it's the charging high each month aspect that they get confused by. Charge up, pay off, charge up, pay off....if they are reported to in the charge UP portion of your month, that's all they see...