So what do you guys know about credit and credit scores?

FunkSoulBrother · Jun 22, 2004

(No, this isn't a horror story, just questions.)

Being a gambler and at the same time a generally irresponsible young man, I accumulated a lot of credit cards over the past 5 years. The fact that sportbooks took them back in 1999 certainly encouraged me.

Basically I worked up about $20,000 in outstanding credit (not debt, though sometimes it was close) over about 8 cards. I haven't done anything really horrible with it... i mean i've had a high percentage of it used over the years and missed a payment here and there, but nothing over 30 days.

Well through a combination of me growing up, sportsbooks cutting off CC payments, and more income, I've finally got all 8 cards completely paid off. I haven't been irresponsible with them and I have cash, so I have no reason to be cutting them up to protect myself from myself or anything like that.

So now I'm sitting here with $20,000 in completely open credit, spread over 8 cards, about half of which have obscene rates. Right now all I'm interested in is a decent score so I can maybe look into buying a home in the next 10 years.

From reading online, I'm getting mixed opinions on what I should do regarding keeping/closing some of these accounts. On one hand, I've read that a big part of your credit score is debt-to-credit ratio, but if I'm keeping zero on all my accounts, wouldn't $0 of $15,000 or $10,000 be the same as $0 of $20000?

I've read that the age of accounts is important, but of course all my oldest accounts are the highest rate ones.

And finally, 20K is still a big chunk of my annual income. Wouldn't lenders be happier to see me close half of them down to 10K so they knew I'd have less possible debt if I was to use it all?

Any advice? Should i close some accounts? Just hold onto them all and not use them for account age benefits? Anything I'm totally overlooking? Comments? Flames?

Thanks guys and gals,
-FSB

Dante · Jun 22, 2004

FSB..

in my opinion you should keep one card with the highest limit and cut the rest of them I have only one card that has a limit higher then I will ever use. 2 reasons I think you should do this

1. The more you have open the better chance you will be tempted to do something stupid like charge them all or something that you will regret.

2. also the more you have open the better chance someone can fraud you if they get ahold of your cc number

good luck FSB this is only my opinion but I think its a good one

FunkSoulBrother · Jun 22, 2004

Thanks Dante.

As far as #1, that would reduce me from $20,000 to $3,500.. I dont have really high limit cards.

Thats ok with me, but it would be less money to fall back on if I needed it.

Also as far as #1, from what I've gathered reading online, if I close 7 accounts and drop from $20K to $3.5K then I will lose a lot of credit history and maybe negatively impact my score? Will this clear up in the long run? Anyone know? Also will it look good to have 7 acct closings in 1-2 months?

2.) Good advice, but in this day of instant internet account statments I'm not too worried about something getting charged that I wouldn't notice. I use 1-time use numbers online and all that safety business.

Keep the opinions coming guys

EveryGamblersDream · Jun 22, 2004

The best thing to do is close most of the accounts except maybe 2 or 3. You need to have some sort of payment history continous for your own benefit. You should purposely use a few of the cards to buy something & pay off the balances immediately as that would look real good.

OMNIVOROUS FROG · Jun 22, 2004

Hey FSB whats up. How about some SAT practice program names. I run credit daily for people. You sond like you should be in good shape, do you know your FICO? Personally, I would close 1/2 the accounts, as it could be perceived as a red flag. Also, when closing them, ask for annotation, closed per customer's request. It makes a difference. Available credit is somewhat of a factor, but income to debt ratio, bk's and derogs: slow pays, no pays and charge offs are the worst. They will kill your score and take you out of A paper. Term of established credit is also important. Sounds like you have a great plan. I have been in your shoes on this one. Whatever you do, never even consider credit counseling, under any circumstances. Just like a BK...Best Wishes...OF

I think I have 2 or 3 cards with balances. One more thing, try not to have anything maxxed out. Better off with 50% on two cards, then 1 maxxed out one. I learned that the hard way on a 0% bal xfer...

CedarCreaker · Jun 22, 2004

FSB,...I AM IN THE FINANCE BIZ AND MY ADVICE IS 1) YOU SHOULD CALL AND REQUEST TO CX ALL BUT MAYBE 2-3 OF THE LOWEST INTERST RATE CARDS...BY YOU CALLING IT WILL SHOW ON YOUR BUREAU "CLOSED BY CUST REQUEST " WHICH LOOKS MUCH BETTER THAN CLOSED BY CCARD COMPANY...2)NEED TO BUY A CAR ON CREDIT...THAT COUNTS ALOT TOWARD YOUR SCORE3) PAY OFF ANY DR. BILLS AND ANY STUDENT LOANS IF HAVE...THAT LOOKS BAD TO HAVE THEM..AND THERE YOU GO...CHARGE WHAT YOU WANT/CAN BUT PAY IT OFF ENTIRELY EACH MONTH...IN FACT CHARGE SOME STUFF YOU WOULD NORMALLY PAY $ FOR BUT BE SURE TO PAY IT OFF ENTIRELY EACH MOTH (NOTICE THE KEY WORD "ENTIRELY")...NOW YOU WILL START TO LOOK GOOD ON PAPER...OH YEAH...PICK MORE WINNERS AND THEN YOU WILL HAVE MUCH MORE $$$$...GL

Fishhead · Jun 22, 2004

I think Dante's advice relating to the chance that you may use your card more than you are apt to is definetly a concern one should be worried about.

However, it seems like you have your credit well under control and are a responsible money manager.

I take the stand that you are wise to have as much AVAILABLE credit as you can get your hands on if your a responsible money manager.

One big factor is the credit to debt factor like you mentioned........think what position you would be in if you occurred a financial problem where you were forced to go into debt lets say $5,000 and you only have one card with a $15,000 limit.

Your ratio would be 33%, whereas if you keep the maximum amount you may have a total available limit of $50,000, thus your ratio is a mere 10% which is much better in the eyes of a lender.

Again, analyze your own unique situation and make your own decision or seek the advice of a professional.

I personally would NEVER give back very much credit once I have earned it and currently have 6 cards with well over $100,000 in available credit and am glad its there in case I ever should need it.

jerseymike111 · Jun 22, 2004

Close all your CC accounts except two[the lowest rated ones]
Having too many OPEN accts will keep your credit score down.
When you have two left wait a month.Your score will go up.Then call the two credit cards co. and make a better deal with them.Tell them your going to cancel them too ...unless they lower the rate and move up your credit line.Ask for recovery.
The reason you keep two is because with two you can always use one to pay off the other at 0 to 3.99 for atleast 6 mos..If you still have a balance after the 6 mos.Pay it off with the first one.You will always have a great rate!

FunkSoulBrother · Jun 22, 2004

Thanks for more advice guys.

OF: there are a couple good pieces of SAT software.. I'd read the reviews to see whats the best for this year, as its been more than a couple since mine

Princeton Review

Kaplan
College Board

are all respected names in the biz. Just don't let Kaplan trick you into any $500+ SAT courses and I'll promise not to go to credit counseling. Deal?

FunkSoulBrother · Jun 22, 2004

jerseymike, Is it often successful, asking for a lower rate/more credit/both like that?

Fishhead · Jun 22, 2004

Past thread related to the credit card business.........

http://forum.therx.com/6/ubb.x?a=tpc&s=100090022&f=988094022&m=772104641&r=551107641

Fishhead · Jun 22, 2004

If you are a member of Bank of America, you can apply for their card now and get 9 months of ZERO percent interest with no transfer fees.

bigbet1234 · Jun 22, 2004

i agree with fish. it doesnt matter how much credit you have, just dont have it all maxed. if you 100K in credit and are responsible with it, then lender will see this<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by FISHHEAD:
I think Dante's advice relating to the chance that you may use your card more than you are apt to is definetly a concern one should be worried about.

However, it seems like you have your credit well under control and are a responsible money manager.

I take the stand that you are wise to have as much AVAILABLE credit as you can get your hands on if your a responsible money manager.

One big factor is the credit to debt factor like you mentioned........think what position you would be in if you occurred a financial problem where you were forced to go into debt lets say $5,000 and you only have one card with a $15,000 limit.

Your ratio would be 33%, whereas if you keep the maximum amount you may have a total available limit of $50,000, thus your ratio is a mere 10% which is much better in the eyes of a lender.

Again, analyze your own unique situation and make your own decision or seek the advice of a professional.

I personally would NEVER give back very much credit once I have earned it and currently have 6 cards with well over $100,000 in available credit and am glad its there in case I ever should need it.<HR></BLOCKQUOTE>

OMNIVOROUS FROG · Jun 22, 2004

FSB thanks for info. Once you get your act together, and your credit is strong, you can negotiate pretty much everything, balance transfers and purchase rates. I am at the point now where 0.0% is all I use. You can get both balance transfers and purchases at 0.0%. One is locked in 0.0% for life, is I use the card every six months. Also, another trick, you can have revolving debt at 0.0%. Like an interest free loan. When one card becomes due for roll off of 0.0% you balance transfer to another. Beware of hidden fees, transfer fees, and other gotya's. This is one circumstance where money makes money. When you get strong credit wise, you hold all of the power, and negotiate from a position of strength. You will get more 0.0% offers than you could use. It is a worthwhile goal...Best Wishes...OF

jerseymike111 · Jun 22, 2004

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by FunkSoulBrother:
jerseymike, Is it often successful, asking for a lower rate/more credit/both like that?<HR></BLOCKQUOTE>

YES...Just make sure you wait atleast one month to 6 weeks before you ask[so your credit rating goes up] and have a ZERO balance with them when you ask!
YOUR QUESTION TO THEM IS...GIVE ME A REASON WHY I SHOULD USE YOUR CARD.
I did this with citibank and they gave me 0% for 1 year and my credit limit rose from $8500 to 17,500.
I have a 5.99% with them and a 6.99 with fleet.

jerseymike111 · Jun 22, 2004

The key is closing the other 6 cards.Your score will go way up.Trust me been there done that.
GL

Fishhead · Jun 22, 2004

Great time to be in the credit card business as a consumer.

monicus · Jun 22, 2004

Try this. https://www.econsumer.equifax.com/consumer/landing.ehtml?companyName=ZNSP_cps&change_partner=no
They will tell you your current FICO score and why it is that way. They also have a score simulator which allows you to answer those type of questions with a score. For example see if you canceled most of your accounts it would tell you how your credit score would change. You can ask all kinds of questions to see what happens. It is $15.

chalkeater · Jun 22, 2004

FunkSoulBrother,

The number one thing a lender looks at when you are applying for a loan, whether it be a mortgage, personal, auto, home equity loan, etc. is your credit score. Some lenders only pull your credit from one of the three major bureaus, but some like to look at all three.

Payment history, debt to income ratio, employment status all play a key part in making up your credit score.

Depending upon your age, you may or may not want to cancel some of those credit cards you have. By keeping them open, you are establishing credit history. That being said, lenders also look at it that you may run those open limits up again. It's a catch 22 situation.

Ideally, a person should have no more than 2 - 3 credit cards, with limits being proportional to what they earn at work. Always pay your bills on time. If your late, it can and often will hurt you when it comes to apply for a loan.

Also, pull your credit report at least twice a year to check for any inaccuracies. www.myfico.com is an excellent place to pull your credit report(s).

As far as I go, I have 4 major credit cards and 1 gas card, a mortgage, and a second mortgage. I have ZERO balances on all of my credit cards, but I owe just over 100 K for my mortgage and 20 K for my second mortgage. My credit limit for all of my credit cards is just over $85,000. Sure I could run my credit cards through the roof, but I keep them open because I have established credit history, and have no late and/or missed payments, ever. My credit score (the middle) is 777. My wife's is 763. And I am under the age of 30.

My situation may be similiar to yours, so that's why I gave you my scenario. You may want to close 1 or 2 of your credit cards, but if you have a solid history with them, keep them open.

Hope this helps.

CE

assassin · Jun 22, 2004

Getting a mortgage and getting a creedit card are 2 different things, but related.

Mtg lender will look at your front end (mortgage/income) and back end (all debt/ Income). They do look at your FICO score, but unless you really screwed up, it wont matter if you meet the ratios.

Credit Cards:
FICO score of 660 is the cut-off for sub-prime, so that should be your target. Obviously, bankruptcy is the deth knell, and late payments are a killer, but over time the score begins to recover as long as there are no more delinquencies. Having too much in open credit hurts your score, they assume you will use 50% of unused credit availability. Good point above about annotating that cards were closed at the customers request.

Keep the card you have had the longest as it will be a stronger indicator. Begin closing other cards one every 3-6 months, not all at once.

OF plays the same games I have since 1992 when BofA was giveing 5% cash back on a 0% balance transfer, and people like OF and me help accelerate the bankruptcy of Egghead (free points on 0% balance transfers with a 45 day float, but I got my 2 computers, digital camera, digital camcorder, massage chair, dvd player, power washer,etc, first). ATT card is advertising 0%, MBNA will also give good customers 0% for 1 year (on my 2nd year with $35,000 at 0%, total cost $50), Chase gave me a $10,000 0% for life. Better your credit, more offers you receive.

Keep using 1 card and pay it off every month and your score will climb.

Hope this helps.

Man I just had the worst Japenese Food. Never order from The Oriental Rgency in Vienna irginia.