Question
:confused: I'm hoping for some sound advice on this -
Over the years I've accrued way too many credit cards (lol those sign up bonuses are hard to pass up). I'm trying to go through and cancel unused accounts completely even though many don't have any fees associated with them.
Here's my question. When I called one of the credit card companies to cancel, the rep told me that since I have been a very good customer without any deliquencies in my history, it would be beneficial for me to keep the account open for credit history purposes. She told me that whenever my credit report is pulled up, this credit card history will show up in the report and have a positive affect on my score.
Is this correct? And if it is, is there a max number of card accounts until the benefits toward my credit score is flatlined? Also, what if the card hasn't been used for a long time, does it still have a positive effect on my credit score? I know applying and having too many credit cards can have a negative effect on credit score.
Thanks!
Answer
One of the components of the super secret FICO algorithm is average age of open accounts, so I would keep my oldest cards open. Older is better in this case.
http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx
How is FICO® Calculated?
-Payment history 35% of score
-Current credit usage 30% of score
-Length of credit history 15% of score
-Applications for new credit 10% of score
-Total credit types (Mortgage, loans, cars, credit cards etc.) 10% of score
Like Coca-Cola, Fair Isaac keeps the exact formula secret.
Answer
To many credit cards open even if it doesnt have a balance also hurts you
I have a friend that works for Experian
having to many acct open hurts you.
If you balance on acct are over half your credit line
accordin to that website pushback linked
These percentages are based on the importance of the five categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.
consolidate a few credit lines but certainly close acct make sure acct are closed at your request.
Answer
I would keep the account open, or if you have multiple accounts with that bank, ask if all your credit can be combined into one card. That would be even better.
Yes your score can be lowered if you have more than 7 accounts (or some number), but if each of those accounts have a significant credit limit, that will outweigh the damage to your credit score. One thing that determines your score is the percentage of credit you are using. So if you have $1000 debt and 10 cards with a $5000 limit each, your ratio is low, and your score will be high. If you have $1000 debt and only 1 card with a $5000 limit, your ratio is high and your score will be low.
Another factor is the percentage of credit used per card. If you have $4500 debt on a single card with a $5000 limit, that will hurt your score. If you have $4500 debt spread out over 3 cards each with $5000 limits, you'll have a good score.
Answer
To many credit cards open even if it doesnt have a balance also hurts you
I have a friend that works for Experian
having to many acct open hurts you.
Your friend is wrong in stating that statement without additional info.
This depends if the acounts are young and also depends on there utilization %
as rrgg explained.
Scott Bilker of this website (http://www.debtsmart.com) has 80 credit cards and FICO scores in the 800's (as seen here (http://www.debtsmart.com/pages/article_many_cards_050727548.html)).
My uncle has over 30 credit cards and his lowest FICO Score is 785.
Answer
Keeping an account open can help for utilization purposes. It may not directly help with length of history because closed accounts (or installment loans paid off) also count towards length of credit history. Then again, I think closed/paid accounts fall off most reports after 10 years or so, so the open account that was kept could come back into play I guess.
Answer
I read somewhere (and can't find it right now) that the maximum points for "length of credit" is reached at 10+ years. I'm also told that so long as the account is in good standing, it doesn't matter that it hasn't actually been used (through a charge or payment) in years.
Answer
The main reason why it's a good idea to cancel all those extra credit accounts is to prevent any temptation you might have to use those accounts and get into debt.
If you have self control and won't put yourself in that type of situation, the next best reason is because it can be difficult to keep track of so many accounts, so you are more suseptible to fraud.
Consolidating your accounts, if they're issued by the same bank, into the oldest card (stated by an above post) sounds like a good idea.
Having too many accounts open (even without a balance) will only hurt you if a creditor does a manual check and might decide that you can potentially put yourself into debt easily. In terms of determining your fico score, it will only help.
Answer
One consideration: which cards have annual fee and how large?
Answer
After reading that post from one of the members saying my info was incorrect I have research other thing pertaining to this discussion and found there is no really clear right or wrong answer
here some articles on the topic that might help you decide:
How Many credit cards is to many (http://moneycentral.msn.com/content/Banking/creditcardsmarts/P123470.asp)
When to Close accounts (http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/01/27/BU146130.DTL&type=business)
How Many Credit cards should you have (http://www.bankrate.com/brm/news/cc/20050722a1.asp)
Answer
you might want to check out creditboards.com
Answer
One of the components of the super secret FICO algorithm is average age of open accounts, so I would keep my oldest cards open. Older is better in this case.
http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx
How is FICO® Calculated?
-Payment history 35% of score
-Current credit usage 30% of score
-Length of credit history 15% of score
-Applications for new credit 10% of score
-Total credit types (Mortgage, loans, cars, credit cards etc.) 10% of score
This is a little confusing.
Payment history = well, that's pretty clear, it means pay on time.
Credit Usage = I guess that means use a low % of your overall lines.
Length of credit history = I guess this means keep accounts open longer?
Applications for new credit = I guess new apps count against you?
Total credit types = I guess you want more credit types?
Answer
This is a little confusing.
Payment history = well, that's pretty clear, it means pay on time.
Credit Usage = I guess that means use a low % of your overall lines.
Length of credit history = I guess this means keep accounts open longer?
Applications for new credit = I guess new apps count against you?
Total credit types = I guess you want more credit types?
In one of my earlier post, it states, You want to keep the cards you have the longest time with, that establishs Length of credit.
You can have 5 credit cards if your balance on accts is over half the credit Line that affects you score.
If you are one to pay it off every month no need to worry on that
As I stated you can read all the links supplied here and you will see variations on right and wrongs with credit cards.