A Credit Question

[Kamikaze_Badger]

Due to some extremely poor financial ideas from the past couple of years, right now I have two credit cards (both Capital One) and three consumer lines of credit (Walmart, Expert Tire, Paypal). My first card has been active for about three years, the rest all about one and a half to two years. For quite a while my debt to credit ratio was right at about 6:1 due to being an idiot and charging everything. As you have probably guessed, my credit score went from the low 700s to the "Hah, you want credit?" range real fast. Fortunately that was the slap in the face I needed. I've finally got most payed off, right now I have a combined total of $5.8k of credit and just under $800 of debt not counting my car.

 

I've been told countless times that store cards like what I have look terrible on your credit rating. However, if I were to cancel those lines of credit and my second Capital One card, would that negatively affect my credit given that I haven't had them open for very long? Or will it be better to just let them sit with a zero balance for awhile?

[bishop245]

Most of the time to help your credit score having a few cards is a good idea. Charge maybe $50 on each each month and pay it off in full each month to bring your score up. it is good to have separate types of cards too. You have retail and bank cards, but a gas card would likely help also. On another front make sure your car payments are in full and on time, if I understand you right you still have a loan against it.

[Waco]

Charge maybe $50 on each each month and pay it off in full each month to bring your score up.

From what I've heard from multiple people (who aren't stupid about these things and were playing the system to get a better loan for a house) you should maintain about 30% on each of your cards for the highest possible credit score.

[CowKing]

Cancelling cards is not a good idea. It WILL negatively impact your credit. Trust me I spent 4.5 brutal months learning that crap.

[Speedway]

I have been involved with financing in some way or another for about 8 years now. Waco and Cow are both accurate. You should never cancel a card, it does usually result in your credit score lowering. But additionaly, it also would never be able to help raise your credit score since it is now cancelled! Also when it comes to what Waco said, as long as you keep the available balance on the card lower than 40% of your limit, your scores will usually raise every month as long as you make the payment on time! Another way to help your scores increase quickly is by having different types of credit on your credit report. There are 3 types: mortgage, revolving (credit cards), and installment (auto loans). The more different types of credit you have reporting the quicker your scores go up also! All 3 of the credit bureaus have their own way of scoring, but all of these suggestions are "in general" ways to improve your scores.

[Kamikaze_Badger]

Thanks for the advice, makes me glad I didn't make a rash decision to close the accounts. Does paying off balances faster have a direct effect on credit history? Example, if I pay off my current credit card debt at a rate of $200 a month instead of $100 a month, would it look any better, or is it better to establish a longer history of making payments?

[cirro]

my wife works at a loan office, with them, a good payment history is a huge item when she is deciding to give a loan or not

 

my wife has a guide that explains things like what actually affects your credit score and how to read it if you would like me to pass it along to you?

 

shes way bigger into this than me, i was blessed with a good creditscore

[wevsspot]

Never cancel a card, even if there isn't a balance on it. You'll lose the amount of credit available on the card and that will affect your available credit to used credit ratio. It's also a good idea to use the card once in a while (but pay it off when the bill comes due). This may help prevent the CC company from arbitrarily reducing your credit limit - another circumstance that can affect your available credit to used credit ratio. Other advice mentioned above is all good stuff. I'm not in the banking industry but have many many years of experience when it comes to credit for both business and personal uses.

 

As for paying off personal credit card debt and it's affect on your credit history....... all creditors look at the stability and consistency of your payments on the balance due. You should always pay the bill by the due date, and always pay AT LEAST the minimum amount due. Of course, from a debt reduction standpoint - paying well above the minimum due will reduce the number of months or years it takes you to pay off the debt. My advice to my own family or friends working on a debt elimination plan is to pick one account to attack at a time. If you have multiple credit card bills, pick one of those (I recommend the one with the smallest balance) and pay as much as you can afford towards paying that one card off while making the minimum payments on the others. This will help you retire the debt on that card faster, and once that is done you have a sense of satisfaction and accomplishment that usually carries over to the next on you are going to attack.

[Kamikaze_Badger]

Thanks again for all the advice. I've been setting up a somewhat loose budget for myself, and I'll be using that now to determine what to put on cards. Example, gas on secondary credit card, groceries on walmart card, oil changes on expert tire, et cetera. Hopefully this will help build up my credit. Do most utility companies such as cable, gas, and so on report to credit bureaus with good history? Or do they just report delinquency and such?

 

I also found an apparently real, actual, no BS free credit score place, Credit Karma. It's ad supported and doesn't give your actual FICO score (instead you get your TransUnion score), but it seems like a great way to get an idea of how your credit looks.

[El_Capitan]

Build your credit, find a better credit card with no annual fee and gives cashback rewards, then cancel your previous credit card. At the end of the month, pay back your credit card in full. Use the cashback rewards for something nice. If you can, try to get different types of credit cards for rewards (Visa, Mastercard, Discover).

 

I probably get about $80 in cashback rewards every month, and I pay back all my credit cards in full. Your credit score goes up slow, even if it dips after cancelling a card, but the banks want to give you credit to make money off the interest you accumulate, and from the transactions.

 

The point is to pay back credit. Having a cashback rewards incentive is a great way to make sure you do.

[fire_storm]

Thanks again for all the advice. I've been setting up a somewhat loose budget for myself, and I'll be using that now to determine what to put on cards. Example, gas on secondary credit card, groceries on walmart card, oil changes on expert tire, et cetera. Hopefully this will help build up my credit. Do most utility companies such as cable, gas, and so on report to credit bureaus with good history? Or do they just report delinquency and such?

 

I also found an apparently real, actual, no BS free credit score place, Credit Karma. It's ad supported and doesn't give your actual FICO score (instead you get your TransUnion score), but it seems like a great way to get an idea of how your credit looks.

 

Utility bills like cable gas electric phone typically are not reported on your credit report because your not being loaned anything so it doesn't really show credit responsible because unlike loans utility's can usually be canceled at any time without any problems to you or the utility company

 

Not paying Utility will negativity effect your credit score because after a certain amount of time your unpaid utility bills will get handed over to a collection agency which puts it on your credit report which then causes your credit score to go down

 

Your also right about the credit score thing it's worth noting that credit bureaus allow you to check your credit report once a year for free as far as I know there is not place that gives you a free credit score unless you sign up for something which typically costs money It's also worth noting that a credit report is different from a credit score a credit report typically only shows different types of credit you have open if you have any types of bad debt and usually any credit inquiries a credit score which most of the time cost money shows you all the information in a credit report and a credit score along with other information telling you why you got the score you have

Edited November 2, 2011 by fire_storm

[Kamikaze_Badger]

Your also right about the credit score thing it's worth noting that credit bureaus allow you to check your credit report once a year for free as far as I know there is not place that gives you a free credit score unless you sign up for something which typically costs money

 

That's why I linked to that website, because there is no paying money . I did purchase my TransUnion score through FICO, and it was about 20 points higher than my Credit Karma "TransRisk" score. But I would much rather be thinking I have a lower score, gives me more motivation to work on it.

 

And firestorm... http://en.wikipedia.org/wiki/Full_stop