I heard that it helps w/ debt to income ratio...I had a few cards, paid some off & transferred balances..now I have two, One w/ a balance on a 0% card & one that is paid off, but still open & I haven't used it..is this good or bad?
2007-05-23 03:32:25 · 12 answers · asked by Misty B 3 in Business & Finance ➔ Credit
I used to be in the mortgage business and have done more reading on financial topics than the average consumer.
Best advice I could offer is to keep the card open. Call the credit card company and reduce your credit limit (the amount you can borrow with the card). This will ensure that you do not get yourself into more debt on the zero balance card during a moment of weakness. Keeping the card open builds credit history--a very important component of your overall credit score.
Also, you may want to authorize a small recurring charge on your oldest card that you pay off every month. I have had clients with open lines of credit, who have had their accounts closed for inactivity. This has caused major problems obtaining new credit--especially in retirement.
If you have multiple credit cards with no balance, keep the oldest one and close the rest.
2007-05-23 03:48:10 · answer #1 · answered by spdbiz 1 · 1⤊ 0⤋
I too am a proponent of keeping the account open if it doesn't cost anything. I add that because if there is an annual fee that you can't get waived, close it, it's not worth it the difference it makes in your credit score is minuscule. Also a couple of folks have suggested that a zero balance helps your score because it improves your DTI. This isn't true because your income is not a factor in your credit score. The credit bureaus do no know your income. It is a factor in the ratio between credit used/credit available. That is the only reason to keep it open.
2007-05-23 05:08:42 · answer #2 · answered by SPATTMAN 3 · 1⤊ 0⤋
This is what makes up your credit score
35% payment history
30% debt/income ratio
15% length of credit history
10% types of credit established
10% inquiries and new vs.established accounts
Closing a card can affect the 1st four aspects of your score. My advice would be to leave it open and charge LIGHTLY to where the balance is around $25-30 month to show constant activity from month to month to keep it reporting. Once a card is paid, and you don't use it, it becomes dormant and it could potentially hurt your score as opposed to leaving it open with just enough of a balance to where it could be easily paid off but you're letting it carry over to show activity.
2007-05-23 03:46:17 · answer #3 · answered by Anonymous · 1⤊ 0⤋
Your debt-to-income (DTI) ratio is a percentage calculated by adding up all of your monthly debt payments and dividing that sum by your monthly gross income. Therefore, having an open credit account with a zero balance has no effect on the DTI since there is no monthly payment and it isn't income.
Excluding your housing payment, your DTI should be less than 20%. Less than 10% is excellent. Lenders look at your DTI to determine whether it looks like you will be able to pay back the loan or not. Typically a mortgage company will want to keep your housing costs at a DTI level of 28% or less. When added to your non-housing debt, they usually want it to be 36% or less. If you have a lot of non-housing debt (credit cards, car loans, etc.) you will not be able to get a very large mortgage.
2007-05-23 03:53:39 · answer #4 · answered by Lance T 1 · 1⤊ 0⤋
Credit cards are there to provide you with a service, if you don't want the service then close them. RE: Is it better to leave credit cards open after u have paid them off? i have a mc which im keeping open and activily using and also an old navy card that im using i just paid off my target and gap card and i also have a victria secret that i have never used and im not g...
2016-04-01 04:05:56 · answer #5 · answered by Anonymous · 0⤊ 0⤋
keep the first card (the one without the balance) and absolutely don't use it. credit companies do like to see that you have been extended credit, but aren't using it. pay off the 0% balance as quickly as possible, and in the mean time - don't use that card either, until the balance is paid off.
2007-05-23 03:36:39 · answer #6 · answered by SmartAleck 5 · 1⤊ 0⤋
If you don't use it, it doesn't count hugely against you. If it's got something like a $100,000 limit, that could hurt down the road because potential creditors see the possibility of you being $100K in debt from that card.
However, a part of your credit score depends on long-term relationships with the same banks, so if it's a card you've had a LONG time, keep it.
2007-05-23 04:07:46 · answer #7 · answered by zippythejessi 7 · 0⤊ 0⤋
It's better to leave them both open. I know people thinks paying there credit cards off is the best thing for your credit score, but actuality its better to leave a small amount on your card.
2007-05-23 03:52:45 · answer #8 · answered by Sassy Sue 1 · 0⤊ 0⤋
Keeping it open helps your credit. The older your credit the better.
2007-05-23 03:35:39 · answer #9 · answered by cashmaker81 6 · 0⤊ 0⤋
leave the card open, it iwill improve your debt to income ratio
2007-05-23 03:35:45 · answer #10 · answered by Anonymous · 0⤊ 0⤋