Im slowly climbing out of debt. But after I pay a card off, I find an excuse to use it again. I think that canceling each card after paying it off is the way to go, but my wife says it looks bad on your credit. Is that true? I have worked my butt off to get to a 748 credit score and I'd like to keep it.
2007-04-02 16:17:12 · 10 answers · asked by Anonymous in Business & Finance ➔ Credit
Sorry to say it but your wife is absolutely correct! You want to maintain a good debt to ratio with credit cards. That is what effects your credit score. For example, if you have 5 credit cards each with a $10,000 limit you theoretically have $50,000.00 to spend. If you've used $20,000 of the $50,000 credit you have, your debt ratio is 20/50 or 40%. Now say that one of your cards had a $2,000 balance which you managed to pay off. That leaves you with $18,000 in debt instead of $20,000 (good, right?); however, if you closed that credit card you just changed your debt ratio for the worse as it went from 18/ 50 or 36% to 18/40 which is 45%. You've lowered the amount of credit available to you by closing that card! My point is keep the cards open until you have substantially paid off most of the credit card debt (stick them in a bowl of water and freeze them) and then close them when your balance is very low. Hope this helps.
2007-04-02 16:36:36 · answer #1 · answered by txnct 1 · 1⤊ 0⤋
Absolutely do NOT cancel your credit cards! That will cut off your credit history, which is so important in keeping your scores high and it looks much better for any future creditor.
Please understand that your good credit history with a creditor is not to be taken lightly and cut off. In this case your Wife is absolutely correct. I am a mortgage broker and I've seen people cancel cards and disqualify themselves from loans. In a home loan the majority of programs require at least 3 trades that have been open and active for at least 2 years.
Rember, a part of having high scores means that you know how to handle the responsibility of having the credit lines and paying them when they are due.
2007-04-02 20:46:01 · answer #2 · answered by rlacy916 1 · 0⤊ 0⤋
No. When you apply for credit they look at the outstanding debt, your payment history and how many sources of credit you have. If you have 30 credit cards(!) it becomes questionable. If you have 3 and they are all current, they like you. If you have 3 and you have no history of using them then that is still questionable because they don't know how you will manage paying your debts.
If this card is your only card and your history of payments is good - you can keep it or toss it. Cuz as long as your history is good other companies will always be trying to get you to use their cards. (Hint) If you have a good history, call up a rival card company and ask what they can do for you. Often they will give you a lower rate to get you to switch.)
2007-04-02 16:31:49 · answer #3 · answered by Larry A 5 · 0⤊ 0⤋
No I think it's a great idea. Now to begin with credit and collateral are a necessity; however; I would save up at least 1,000 and then deposit in my local bank in a C.D. Then I would borrow against it and then pay off those 1,000. Eventually you could do this with several local banks and build your creditt. Then when you need a little extra and have established that credi with ur local banks you can go on and borrow a little more with no security or putting up ur house as collateral. It helps in the long run and may Sounds like a hassle but establish with your local banks, because these credit cards suck and charge large interest rates. You'll never get out of the red.
2007-04-02 16:29:52 · answer #4 · answered by Mimi 2 · 0⤊ 0⤋
Your wife is correct. Multiple lines of credit is one of the things that build score. If you have all of these accounts and keep your spending in line, never using over 30% in any one month on any one card and paying it off in full when you get the bill, your credit score will continue to climb.
2007-04-03 02:49:06 · answer #5 · answered by ? 7 · 0⤊ 0⤋
If you don't want to use it anymore and it has no annual fee, just cut it up and leave the account open. It helps your credit to have the account open but unused. If it has an annual fee, cancel it and take the credit score hit. Contrary to what you and others might think, it is better to have lots of available credit and just don't use it.
Example: If you have 10,000 worth of available credit and you have used half or more of it, this gives you negative points on your credit report. If you have 10000 of credit and you have used 1000 of it... your score will continue to climb. My score is 781.
If I have been helpful, I'd appreciate your vote.
2007-04-02 16:23:09 · answer #6 · answered by chimneygod 3 · 0⤊ 0⤋
Keep the card open: Cut It Up! Toss it
Length of credit history is a factor on your score.
Congrats on the mid 7's
2007-04-02 17:36:31 · answer #7 · answered by Byron W 3 · 0⤊ 0⤋
Make sure that you keep a few tradelines open and make SURE that the cards you choose to cancel close your account PER CONSUMER. I was a customer service rep and would sometimes get lazy and just mark it as closed. It is that mark that will negatively affect your credit score. When you close an account, ask for a letter that states that it was closed at your request.
2007-04-02 16:23:30 · answer #8 · answered by Anonymous · 1⤊ 0⤋
NO ..
EVEN BETTER...
CLEARS MORE DEBT THAT YOU DON'T NEED.
AND HELPS PREVENT THEFT AND FRAUD IN YOUR NAME.
MAKE SURE YOU ASK THEM TO SEND YOU A LETTER STATING YOU REQUESTED TERMINATION OF ACCOUNT.. FOR YOUR RECORDS.....
2007-04-02 16:21:21 · answer #9 · answered by cork 7 · 0⤊ 0⤋
no, thats actually the smart thing to do
2007-04-02 16:21:54 · answer #10 · answered by Roadkill 2 · 0⤊ 0⤋