Can you give me any proof of your assertion? A quote from your banker? Something from Fair Isaac, or anywhere else?

Also, applying for new cards for a store discount will hurt your credit score. Both the credit inquiry and having an account less than six months old have a large negative impact. Even cards less than two years old have a negative impact. Only apply for credit when you need it.

Any guesses whether that hurt my score? Last I checked my score was fine and I’m not getting a mortgage anytime soon, so it’s mainly a question asked out of curiosity.

(Yes, five years later I still remember that cc number. I also have memorized two library card numbers!)

I’m a bit new to blogging (but not new to the simple $) so if this is a horrible example of blogger etiquette, slap me.

I just wrote a piece about a lesson I learned from closing a card. Might be worth a read to those interested in other things to consider when closing a specific card.

check it out at http://www.debthackers.com/2007/08/life-lesson-closing-credit-card.html

First, let’s look at the way FICO computes a score. Payment History 35%, Amount Owed (Capacity) 30%, Length of Credit History 15%, Types of Credit 10% and New Credit 10%.

So aside from Payment History, the balances you carry in relation to the amount of potential debt available or “Capacity” is the second most important factor. I saw where you said 20% of the available credit as a balance is good and I agree, although 30% will work just as well. The issue is not to exceed either. A credit score is used primarily to determine who will go 90 days late on their payments and who will over extend their credit limitis.

So, using the FICO model for calculating scores, the Length of Credit History becomes the third most important factor. Any account that has some age and either a small or zero balance will count as a positive for you. When people ask, I personally don’t recommend ever closing an account for this reason.

Now, to rebuild credit and/or add points to your scores via a legitimate vehicle that is very cost effective, I recommend using secured loans from credit unions to establish new credit (10%)which charge a minimum of interest for a six month loan (often $5 to $8 for a $500 amount), will automatically draft from a secured account like a savings account, to show a sound payment history (35%) and then will show a pay off after six months which reflects possitively on the amount of credit owed (30%).

So, by using this technique and by working with the credit you already have, you can effectively raise your credit scores 100 to 200 points over a twelve month period if you are persistent because there is nothing to keep you from taking out a loan every pay day. By taking out joint loans like this, my wife and I were able to add “12″ loans to her and my credit files by taking out six loans each. All of this is perfectly legal, cost effective and added over 120 points to our credit scores as each loan, when paid off adds 10 to 20 points to your score by addressing the components of scoring previously noted.

Regarding paying out your balance over a period of time, it is, in fact, better to pay off the balance incrementally. That is not to say it will hurt you to pay off the balance each month. What does hurt is to carry a large balance for some time and then pay it all off at once. The scoring model looks for consistent payments (payment history) which reduces the balance (read capacity) but allows interest to be made. I have a friend that had $100,000 in credit card debt which he carried for a year or two. He sold a piece of real estate he owned and paid off all the debt at once. His scores went down to his amazement. The FICO mathimatical model looks for consistency above all else because that is the safest customer to predict a positive result,i.e. profit.

Paying off with a “big hit” doesn’t fit the profile of a “perfect” customer for FICO and the lenders.

Hope this helps.

It goes in the red column against your name.

I just got a $5000 bonus (of which I earnt every last cent, TYVM :) ) which I used for nothing else other than cancelling one $3000 c/c and bringing another $2000 to a $0 balance. I can’t think of a better way that I could have used that $5000 to support and provide for my family.

(When I called up the bank to cancel the card the polite young man asked me why I was cancelling the card and I said that I didn’t want the credit against my name. He then reminded me that I had paid the fees up until next April, would I like to hold onto the card until then? I told him that I don’t want the credit against my name. He offered to put me onto a low-rate c/c and I told him that I don’t want the credit against my name. He then asked me if I really wanted to cancel the card and I told him for a fourth time that I didn’t want the credit against my name and he finally put me on hold to, presumably, go ask his boss how to ACTUALLY cancel a card.)

Economics is mostly a numbers game, but even Einstein couldn’t understand parts of it. Posts like Teri’s make me think that while credit is neutral, the feeling in your soul that there is not “enough” is a rough place to be. And, a lie. Not trying to spiritualize, but Teri is on the cusp of something.

For all other events which require good credit (credit cards applications, car loans, educational loans, etc.) it doesn’t really matter what your credit limit is as long as you have a good credit score.

In light of this, not canceling credit cards will make sense.

If anyone has factual data which negates my current perception, I will be happy to follow it up.

Will opening cards like this (to get store discount etc.) ruin the credit score? They have to check my credit history background anyway. It looks like it is not a great idea to do such things to improve the credit score. Trent, any input (for future article) on this?

I personally use 3 credit cards: Visa, Master Card and Amex. Then, I am sure that they take one of my credit card wherever I go, that my limit is high enough to not affect my debt-to-credit-ration and the most important part, I pay the full bill on all my card at the end of the month.

Then, you will build a strong credit history, get reward point from your credit cards and not pay interest on top of it!