Credit Question

[TimmeH]

I have been very stupid with credit cards ever since I got my first one my freshman year of college. I often used them to live outside my means seeing as I was a poor college stupid working a minimum wage retail job. Five years later, and I have eight different credit cards and a few thousand in debt to show for it.

But over the last year, I have been much better about things. I no longer have schooling to pay for, and I have a decent paying job that gives me more than enough to get by, so I have had no need to spend outside my means. In fact, I've used the extra money to eliminate a few thousand dollars in credit.

But now as I'm paying off cards and no longer really needing them, I'm wondering about cancelling a few of them. I have a few store credit cards(ie Best Buy) that have insane interest rates(approaching 30%) that I will never use again. I'd like to cancel them, but

a.) I don't know how to go about doing that and

b.) I don't know how that'll affect my credit rating. I've had a horrible credit score ever since I could have a credit score, lol, and I know I'm finally starting to bring it up a bit, so I don't want to do something that will set me back again.

I don't really understand the whole credit rating system, but I've seen some posts on here in the past with people asking questions and others being able to answer the questions that seem to have some understanding of how it works.

I don't know if it matters, but at this time, I'm making payments on three credit cards, car loan, student loans, and my Dell computer. I have five credit cards that have had no activity in months. Is it safe to start cancelling the inactive cards?

[countryboy]

Re: Credit Question

I have been very stupid with credit cards ever since I got my first one my freshman year of college. I often used them to live outside my means seeing as I was a poor college stupid working a minimum wage retail job. Five years later, and I have eight different credit cards and a few thousand in debt to show for it.

But over the last year, I have been much better about things. I no longer have schooling to pay for, and I have a decent paying job that gives me more than enough to get by, so I have had no need to spend outside my means. In fact, I've used the extra money to eliminate a few thousand dollars in credit.

But now as I'm paying off cards and no longer really needing them, I'm wondering about cancelling a few of them. I have a few store credit cards(ie Best Buy) that have insane interest rates(approaching 30%) that I will never use again. I'd like to cancel them, but

a.) I don't know how to go about doing that and

b.) I don't know how that'll affect my credit rating. I've had a horrible credit score ever since I could have a credit score, lol, and I know I'm finally starting to bring it up a bit, so I don't want to do something that will set me back again.

I don't really understand the whole credit rating system, but I've seen some posts on here in the past with people asking questions and others being able to answer the questions that seem to have some understanding of how it works.

I don't know if it matters, but at this time, I'm making payments on three credit cards, car loan, student loans, and my Dell computer. I have five credit cards that have had no activity in months. Is it safe to start cancelling the inactive cards?

Yes, go ahead and start cancelling the inactive cards. All you have to do is contact the customer service number that you use to get balance, payment history, etc... and tell them that you would like to close the account. If you don't do anything, eventually they should close your account anyways due to a length of time of inactivity.

You won't see any negative reports on your credit due to cancelling a credit card. Its no different than paying off a loan balance and it being said and done. Also, having the cards open without activity could hurt your credit rating if you should ever choose to apply for new credit. Banks will look at how much credit you have extended and even though those accounts have a zero balance, its still extended credit.


Oh and congrats on working on becoming debt free..its not an easy thing to do.

[Lordcledus]

Re: Credit Question

DO NOT cancel the inactive cards if they have a zero balance. This will lower you credit to debt ratio which will lower your credit score. By keeping those other accounts open and you paying down the others, your credit score will increase on the debt to credit ratio alone. Factor in if you are making your payments on time, and you will grow your credit in no time. Remember, just because you have the available credit, doesn't mean you have to use it. Keep those cards open.

[Trevytrev11]

Re: Credit Question

DO NOT cancel the inactive cards if they have a zero balance. This will lower you credit to debt ratio which will lower your credit score. By keeping those other accounts open and you paying down the others, your credit score will increase on the debt to credit ratio alone. Factor in if you are making your payments on time, and you will grow your credit in no time. Remember, just because you have the available credit, doesn't mean you have to use it. Keep those cards open.

Kind of a double edge sword as if you have to much available credit, the banks may see you as a high risk to go out and use it all up. I've always heard that $10-$15K in available credit is ideal for most (of course this depends on your income level) via 2-4 forms of credit cards (Target card, Visa card, Shell card, etc.).

If your going to close up cards, try not to close the ones that have been opened the longest as this will help benefit your credit history.

Also, when you close your account, request a letter in from the company (legally they have to comply). File the letter away in case you have any problems or need to prove dates to one of the credit reporting agencies.

Also, if you have debt 3 cards and two of them have extremely high rates, try and transfer those balances to the lower rate card. You may have to pay some initial fee's (usually 3% up to $50 or $75 max), but it will likely save you interest in the long run. If you don't have the available credit on your low rate card, call the company and ask for an increase. The worst they can say is no, but if you've been timely with your payments and have a change of income status, they may bump you up.

Unless you plan on buying a house in the next year, you have plenty of time to get your score up by just doing a few little things.

[Lordcledus]

Re: Credit Question

Kind of a double edge sword as if you have to much available credit, the banks may see you as a high risk to go out and use it all up. I've always heard that $10-$15K in available credit is ideal for most (of course this depends on your income level) via 2-4 forms of credit cards (Target card, Visa card, Shell card, etc.).

If your going to close up cards, try not to close the ones that have been opened the longest as this will help benefit your credit history.

Also, when you close your account, request a letter in from the company (legally they have to comply). File the letter away in case you have any problems or need to prove dates to one of the credit reporting agencies.

Also, if you have debt 3 cards and two of them have extremely high rates, try and transfer those balances to the lower rate card. You may have to pay some initial fee's (usually 3% up to $50 or $75 max), but it will likely save you interest in the long run. If you don't have the available credit on your low rate card, call the company and ask for an increase. The worst they can say is no, but if you've been timely with your payments and have a change of income status, they may bump you up.

Unless you plan on buying a house in the next year, you have plenty of time to get your score up by just doing a few little
things.

His main problem is he is wanting to close 5 of the 8 cards he has. That will kill his debt to credit ratio, which will lower his credit score faster than almost anything. Banks will see him as a higher risk because of his debt ratio, which could cause him to not get credit at all, or at a huge interest rate in the future. Closing 1 or 2 accounts isn't going to make much difference, but giving up around half of your credit available isn't a wise thing to do.

[Trevytrev11]

Re: Credit Question

His main problem is he is wanting to close 5 of the 8 cards he has. That will kill his debt to credit ratio, which will lower his credit score faster than almost anything. Banks will see him as a higher risk because of his debt ratio, which could cause him to not get credit at all, or at a huge interest rate in the future. Closing 1 or 2 accounts isn't going to make much difference, but giving up around half of your credit available isn't a wise thing to do.

I guess it really depends on his available balances on those 8 cards. He says he only has a few thousand in debt, so I'm thinking $2-3K. If all of his cards have a $5K limit, he'd probably still be OK if he closed 4-5 (debt would be less than or close to 10%). If they are all $1-$2K, then you are right.

But, if he's not looking to buy a house or a car or some other major purchase in the next 12 months, his credit score isn't very important. He'd probably be better off closing 4 or 5 of his cards in order to avoid future temptation and then he can focus on paying down the ones he owes on. If he wants to lower is ratio, he could always call and ask for a credit limit increase. There'd be an initial dip, but may not really be a factor to him.

[joshuar9476]

Re: Credit Question

that best buy card can actually be your friend if you use it responsibly. what i did was whenever i wanted that new game or cd or dvd, i used the best buy card to purchase it, then went right home, got on the internet, and used my debt card to pay it off. nowadays the wife and i just use it about once a year. best buy offers 0% interest on things over $500 i think if its paid off in a year. so we will buy one big ticket item (laptop, washer/dryer, camcorder) then pay $100 a month before the year is up.