I Just Instantly Added 12 Points to My Credit Score

Will requesting a credit line increase affect my credit score

A couple posts ago, I boasted about my above average credit score of 751.

Well, it’s time to gloat again. I just added 12 points to that credit score. Boom. Just like that. All it took was a 10 minute phone call.

What wizardry did I use to get a large boost in score? I asked for a huge credit line increase.

I opened a credit card sometime in college. They started me at a $800 credit limit. Over the years, I regularly requested credit line increases (you should do the same). I would get automatic increases of less than a $1,000. I was happy to be approved so easily and quickly.

Well now I’m about to start my first full-time job with a full-time salary. This is a huge change in my life and spending. I know it and the credit card companies know it.

I called my credit card issuer a couple days ago and told them I wanted to request a credit line increase. I opted for this route vs. the typical online route because I wanted to explain my situation.

They asked me income questions and then finally how much I wanted to request. I asked questions like, “Can you just give me the maximum you’re allowed?” and “What do you think is a good number?”. I realized that the representative can’t really help with that. You’re supposed to just ask for some arbitrary amount and their people will evaluate your request.

Luckily, I’ve looked at so many personal finance websites to know that $15,000 was a pretty standard beginning credit limit.

My credit limit at the time was $2,800. I asked for $15,000. I even laughed and nervously asked the person on the other end, “Do you think that’s too much?” He couldn’t respond to that either.

He responded, “Great news! You’ve been automatically approved for a credit line of $3,600.” But that wouldn’t cut it. I asked him to put my request through anyway (by the way, this will result in a hard pull on your credit).

He submitted the request, and 10 minutes later I received a phone call confirming that _I was approved _for my credit line of $15,000. Happy days! I suddenly felt empowered.

An important note: just because I increased my credit line to $15,000 does not mean I should change my spending habits in any sort of way. I will continue to probably put less than $1,000 on it a month. But this does wonders for my credit score.

What are the real effects of increasing my credit limit by over 500%?

I used Credit Karma as a proxy. I noted in that same post that Credit Karma was pretty darn close to my actual score (Credit Karma estimated 753 vs. the actual 751). Well Credit Karma also has this really cool Credit Simulator tool. Check it out, it’s under My Credit –> Credit Simulator.

I had never used it before so I’m sort of discovering it for the first time. It already knows all about your credit card accounts (like the limits, how many late payments you’ve had, etc.). This tool let’s you see how certain actions impact your score. It shows what happens if you make too many credit inquiries (like if you’ve applied to several cards), if you close your oldest credit card account, and much much more.

I simulated the credit line increase and found that it increased my credit score by 12 points!

Will requesting a credit line increase affect my credit score

If you too have recently gone from student to full-time employee, use this transition to up your credit line. If you get a big raise, you can use that too to up your credit line. Credit card companies mostly care about your income. If you’ve been with them a while and have been on-time with payments, that will help too.

Note that I had been using the same credit card for a couple years while in school. When they evaluated my very large increase, I’m sure my on-time payment history helped them approve me.

Lastly, don’t be afraid to ask for a really large increase. Going from $2,800 to $15,000 seemed crazy to me, but it’s not. That’s pretty standard for a credit card. In fact, maybe I should have asked for more!

If you’re just starting out with your credit, know that you have some leverage. If you work full-time, just opened your first credit card, and received a pretty low limit, use it for a year with that low limit. Then after that year, call them up and ask them to increase it significantly (maybe $15,000 or more). Your income and year’s worth of on-time payments should be enough for them to give the okay. This is a total guess from me, but it seems reasonable to me. In fact, maybe it’ll work after just 6 months.

If you recently started earning much more money and have a pretty low credit limit, go request a much larger one!

Credit Card Andy is a personal finance blog focused on teaching young 20-somethings how to manage money, maximize their wealth, and save for the future. I focus on making money really easy to understand so we can all focus on the bigger things in life.


Does Requesting an Increase in Credit Line Affect My Score?

Your credit score could be impacted by a credit line boost.

Maintaining a high credit score ensures that you'll have access to financial services and products now and in the future. A good credit score demonstrates to lenders and creditors that you are financially stable and a good lending risk. In turn, you can qualify for the loans and credit cards you want at a reasonable interest rate. The accounts you carry and your payment history for those debts are not the only factors that influence your credit rating. Seemingly minor changes, like increasing the credit limit on your credit card, will also impact your scores.

It isn't your credit limit itself that impacts your credit score, but the ratio of debt you carry. Your current balance compared to your available credit limit is known as your “debt-to-limit ratio.” The lower your debt-to-limit ratio is, the better your credit scores will be. This is because a low debt-to-limit ratio indicates that you are not suffering from financial problems and manage your debt well – making you a lower risk for lenders.

When your credit card company approves your request to extend your credit limit, it increases the maximum amount of debt you can incur on your credit card account. In turn, this lowers your existing debt-to-limit ratio. According to CNN Money, your credit card company is most likely to approve your request for a higher credit limit if you have made timely payments on the account in the past and maintain a good credit score.

Ideally, you should aim for a debt-to-limit ratio of no more than 30 percent, but your credit scores will benefit the most by a debt-to-limit ratio of 10 percent or less. You can calculate your own debt-to-limit ratio by dividing your current balance by your credit limit. For example, if your credit limit is $5,000 and your balance on the card is $2,500, you have a debt-to-limit ratio of 50 percent. If your credit card provider will not improve a credit limit increase, you can also decrease your debt-to-limit ratio by paying down your balance.

Credit card issuers have the right to turn down your request for a higher credit limit – even if your payment history and credit scores make you a low-risk customer. You can increase the odds of getting approved by using your good credit as a bargaining tool. Credit card companies often face customer acquisition costs of over $100 per account. These costs quickly add up, and the credit card company does not want to lose you as a client. Point out that you have been considering transferring your balance to another card with a higher credit limit, and your credit card company might be more wiling to give you the spending limit you want.


Does Requesting an Increase in Credit Monitoring Affect My Score

Credit ranking scores, or FICO scores, are three-digit numbers inside 300 and 850. A lot of these scores show lenders a good borrower’s borrowing behavior additionally credit-management skills. FICO lots of more than seven hundred are considered “very good,” and scores of smaller than 600 “indicate maximum risk,” according to any Consumer Federation of United states. Many factors, such in the form of amount of debt, a variety of accounts, judgments, funds line increases (and decreases), and credit inquiries involve the credit score.

There are two important types of credit inquiries: hard credit inquiries and so soft credit inquiries. Softer credit inquiries are initiated by a consumer examining it her own credit file. The federal government consists of best credit monitoring services U.S. occupants have free access that will their credit reports from AnnualCreditReport.com. Accessing a credit ranking report at this blog site will trigger a softer report. A hard query is generated by nearly any lender who checks a major borrower’s report for the type of purposes of rendering a very credit decision.

Soft credit scores begin doing not affect a lines of credit report at all. Potential buyers can pull these monthly, in needed. Credit overseeing is essential for personal economic health, and the passageway of the Fair Debt Reporting Act was calculated partly to help potential buyers more easily manage credit ranking reports.

However, hard queries do affect debt scores. One or simply two hard requests are not a major problem. But too many inquiries (more while compared to six over a major six-month period) may possibly begin to minimized a FICO mark.

Credit-line stimulates are don’t technically fast cash loan applications. Credit seekers usually necessity not inflate out documentation or return income data to demands a credit-line increases. However, in the most cases, providers must drag an absolutely new hard debt report in render a very decision concerned with requests designed for credit-line raise. Lenders happen to be required in disclose these. Therefore, each request in support of a credit-line increase should really be viewed as each loan function. If home owners have a great deal of credit inquiries, they will need think a couple of times before inquiring about an bring up.


How will credit card balance transfers affect my credit score?

Transferring balance from a high interest credit card to a new lower interest card can definitely save you money on interest, if nothing else at least until the introductory rate ends (if applicable). We all receive those infamous credit card offers in the mail, urging us to apply for a new card and transfer our high interest balance over, in order to take advantage of the lower interest rate that this new card has to offer.

This seems like a logical thing to do, right? I mean, lower interest rates on your credit accounts equals more money in your pocket, true? Yes, transferring your credit card balance from a high interest credit account to a lower one is an excellent way to save money on interest, especially if you carry a lot of debt on your credit card(s).

But how does this affect your credit rating and credit score? The answer to that question really depends on your situation, and how you go about it.

Lets say you have $5,000 in debt on a credit card account from “ABC Credit Services”, which has a total credit line of $10,000. For this example, lets just say this is currently your only open credit card account. Since your debt takes up half of your total credit line, this would put your percentage of debt compared to your credit line, for this account, at 50%. We’ll call this your “debt percentage”.

You’re making payments to ABC with no problems and you seem happy with the account and the interest rate. That is, until one day you check your mail, and there it is, a credit card offer from “XYZ Credit Services” with a fixed interest rate set at half of what you’re paying now with ABC! Suddenly dollar signs start popping up in your head, and you start trying to figure out how much money you could save by transferring your $5,000 balance to XYZ. You then decide you’re going to apply for the account at XYZ. Your credit is good right? No problem! You receive the card in a week or so, and go ahead with the balance transfer.

So how does this affect my credit score?

How this balance transfer affects your credit rating and credit score really depends on what you do from this point on, and also what your credit line is on your new card from “XYZ”. If your credit line on your new card is lower than that of the original “ABC” credit account, then your “debt percentage” will be higher, which generally will lower your credit score. This would be true if you closed the original account at ABC, and kept your new account as your only open credit card account.

If you’ve had your “ABC” credit card for a while (maybe 2 years or more), and you have a good payment history with them, then it will most likely be in your best interest to keep that account open, even if you don’t use it. Especially if your credit line with your new lower interest card is below $10,000. Usually for the sake of your credit score, you don’t want to increase your “debt percentage”, you want to decrease it.

For example, if you keep both accounts open, you will have a total credit line of $20,000. With your $5,000 in debt on your new card, and your original account at ABC having no balance, your debt percentage would only be 25%, which is a good percentage and your credit score will reflect that.

Now reverse that and say that you closed your credit account from “ABC”, given that your credit line at “XYZ” stays the same, you would have a debt percentage of 50%, which is what you started out with in the beginning. Add to that a newly acquired credit card with little or no payment history on it, and you’re credit score would almost surely decrease, at least until you establish a longer payment history on your new account.

So for this example, it would probably be best to keep both accounts open. Your lower debt percentage could possibly offset the hit your score took from obtaining your new credit card. And looking to the future, it should look better on your credit report this way too.

Avoid increasing your debt percentage

When trying to keep your credit score as high as possible, try to avoid doing anything to increase your debt percentage. Even though the amount of debt you are carrying on your “revolving credit” is the same, it will always look better if you’re using 25% of your total credit, compared to using up 50% of it.

But don’t try too hard to decrease it either

Be sure not to take it too far by applying for more credit than you need, just because you think it will help your credit score by having an even lower debt percentage. Obtaining any new credit will generally bring down your credit score slightly, at least for a short period of time. Applying for credit too much and too often will almost always have a negative impact on your credit score, which is exactly what you don’t want. Your time would be better spent on trying to pay down this debt instead. Tip: Do your research and find the best cash back credit card and best balance transfer credit card before you make any decisions.

As with anything, being informed is the key

Balance transfers such as this can and will save you money on interest, if you do it right. Stay informed about how things like this affect your credit, and you should be just fine!

Hello – I am in the middle of purchasing a home and the closing wont be done until the end of August or September. I have been pre-approved already with the lender/bank. I received an offer from Citi to transfer balance with 0% till 02/01/14 and then the fix rate that I currently have for 15.99% will start if I don’t pay the account in full. I can transfer up to 4 credit accounts for up to $9300 – I want to do this if and only it doesn’t affect at all the process of the mortgage that I have. Will this reflect or have any impact at the time of closing with the lender? I was told that at closing they run your credit again and check that nothing major has been done. I also wanted to know that if I do decide to do a balance – it does however have a 4% charge to transfer – and I don’t pay off the full amount by 02/01/14 – does this affect my credit score? Does it affect my credit score at the time of transferring the balances? I wanted to do this because I noticed that the lender is adding up all my minimum payments do from all my credit card debts and adding everything up I have around $970 per month of payments, and if I can transfer 4 accounts into this Citi – with a 0% interest, then this will only show as one payment – but I am not exactly sure if it will affect anything else.

I appreciate your help and time on this. Thank you – Melissa

I have balance of 10K in one Credit card and 4K in another. I also got a new credit card with $3k limit, that I have not even activated yet.

I am quitting my job in about 2 weeks and will be out of country for about a year or so, because of a family health situation. However I will be back in in the country in about a year or so and would like to do something to settle/consolidate my debt, before I leave the country, incase there are any issues after I leave and I have problems once I am back. I absolutely do not want to to get into any situation with being sued or have warrants on my name or what have you. I am a normal person and have not had any problems with the law etc so far, except for not being able to pay back the Creditors.

I will be leaving in about 3 weeks and need to know how to handle this best. I have very little in savings + miscellaneous cash (less than $6k). I am considering debt consolidation/settlement and am willing to use some of the $6k saving to get this ordeal off my back before I leave. However, I would also need to save whatever cash I can to help my family with the medical situation.

1.How can I do this in a way that my debt gets settled/consolidated and I also am left with some cash to take with me with my move?

2. Can I settle the debt with the credit card directly vs. with the settlement/consolidation company. That would be ideal, or would it??

2. WHat is the difference between consolidation and settlement? Which one is better? Which affects your credit less and which is easier and faster to deal with?

3. The 2nd option I am considering is doing a balance transfer of both the cards, into a new card with 0% apr until August of 2014. Chances are I will be back in the country till then, but do not want to take any chances with the creditors/settlers. Id like to settle this ordeal before I leave if possible. Once I get the balance transferred, can I work with the new credit card people directly to settle/consolidate the debt?? Or do I at this point, still go through the settlement company?

Of the 2 options, which one is better?

THanks so much for helping me out with my problem!

Anytime you “settle” your score will tank!! Settling means you are trying to pay less than you owe, while a balance transfer is just that- you pay what you owe in a timely manner and, of course, you can pay the minimum each month.

Settling happens after you start missing payments- you cannot negotiate this til it happens.

I am answering this way after the original post- this is for anyone who might be considering settling.

What does “short time” mean? Have been reading about balance transfers and understand if your credit is hit, it’s only for a short time” if it does happen. Want to refinance my house as well, but are we talking days or weeks? Have to make decision tomorrow.

DD, I would say a short time would mean approx 6 months, maybe shorter maybe longer depending on many other things as well.

I currently have 2 credits cards.

The first, has a $10,400.00 limit of which I have used about $7,500.00. The other has a $4,000.00 limit of which I only owe about $200.00.

Recently, I received an offer from the second card (the one with $4,000.00 limit)of 0% interest on balance transfers. Would it make sense to transfer about $3,800.00 from the other card that has a pretty high interest rate onto this card (which would max out this one)? Or leave them as is?

If you add the 2, my total available credit limit is $14,400.00 and I have used about $7,700.00 which is about 50%.

I want to try to refinance my home within the next couple of weeks and I don’t know which scenario would be best for my credit score

I see on my credit report cards issued in my wife’s name with me as an authorized user. So if I have a number of high limit low balance credit cards in my name only, if I add my wife as an authorized user, does that then improve her credit score by reducing her debt ratio? And vice versa?

Charlie, yes from my experience that’s exactly the way it works. I have my wife added as an authorized user on my credit cards, those accounts show up on her credit report the same way they show on mine, which means she benefits from the lower debt to limit ratio!

MY WIFE AND I ARE GETTING A SIGNATURE LOAN, AND WE ARE PUTTING OUR CAR (WHICH WE JUST PAID OFF) AGAINST A LOAN BOTH OF WHICH HAVE MUCH LOWER INTEREST RATES. NOW WILL IT HURT OUR CREDIT IF SAY, WE WERE TO PAY OFF 5 CARDS, AND CLOSE 2 OR 3 OF THOSE ACCOUNTS? BOTH OF US WILL PROBABLY BE DOING THIS. WE WILL BE PAYING OFF MOST OF OUR DEBT, CREDIT CARDS, DEPOT STORES, ETC. WE WILL CLOSE ALL DEPT. STORE ACCOUNTS, AND MAYBE A FEW CREDIT CARDS. HOW WILL THIS AFFECT OUR CREDIT, AND IF IT DOES, HOW LONG TO GET IT BACK TO GOOD STATUS? WE ARE STARPPED, AND OUR INTEREST RATES ARE RIDICULOUS!! WE ALWAYS PAY ON TIME, AND PAY MORE THAN THE MINIMUM, AND OUR CREDIT SCORES ARENT THE GREATEST, BUT BOTH ARE A SMIDGE ABOVE 700. LIKE I SAID BEFORE, ONE OF MY CARDS IS OVER 30%, AND A FEW MORE ARE AT MID TO HIGH 20’S! HOW CAN THEY DO THIS?

I currently have 2 credits cards.

The first, has a $10,400.00 limit of which I have used about $7,500.00. The other has a $4,000.00 limit of which I only owe about $200.00.

Recently, I received an offer from the second card (the one with $4,000.00 limit)of 0% interest on balance transfers. Would it make sense to transfer about $3,800.00 from the other card that has a pretty high interest rate onto this card (which would max out this one)? Or leave them as is?

If you add the 2, my total available credit limit is $14,400.00 and I have used about $7,700.00 which is about 50%.

I want to try to refinance my home within the next couple of weeks and I don’t know which scenario would be best for my credit score.

Kasia, just transferring balances from one credit card to another existing card should not affect your credit score in a significant way. If it makes financial sense for your situation, I would recommend doing it, from my experience it shouldn’t affect your chances of being approved for a refi. I’ve read different info about if it’s best to have your balances spread evenly among multiple cards, or more balances on one or more of several cards… it’s kind of like 6 for one and a half dozen for the other, but I have not personally noticed a difference in my credit score either way. I always recommend taking the route which helps you pay down your balances faster, that’s the most important thing!

It’s easy to get acustomed to paying a few hundred bucks monthly towards your credit card balances. All your accounts stay “paid as agreed” and you’re still paying more than the minimal payment. What I would do(or actually DO do), is make 2 list 1. All bills that CAN be paid with a credit card 2. All bills that have to be paid with CASH. If you’re like me, 97% of your utility, rent/mortgage, food, gas, etc can all be paid with a credit card. So the key is STOP USING CASH. Use almost your entire paycheck and/or other income to pay down your credit and then use your credit card to pay all your bills. Once you have good credit, the only other factor that can truly raise or lower your scores are your balances. By carrying a 10% credit utilization rate you can raise your scores by 30-50 points. You’ll max out somewhere between 738 and 779 and after that only time can raise your scores. The value in my suggestion is knowing that the card company will report your balance as of the last date of your billing cycle. Your job is to make sure your balance is only $10 by that date. Mine are the 9th, 10th, 28th. My due dates are exactly 3 days before each billing cycle date. So I pay my balance down to $10, wait 3 days until the bill cycles, and then on the 11th, 12th, and 29th, I use those same cards to pay bills, go to games, dinners out, the key is to not to spend more than you earn in a month and your paycheck will be just enough to pay down your credit debt each month and at the same time your credit scores will be as high as they can be.

I CALLED THE BARCLAYS (JUNIPER) ACCOUNT THATS 31%, AND THEY SAID THERE IS NOTHING THEY CAN DO FOR ME! AT LEAST THATS WHAT I THOUGHT SHE SAID, HER ENGLISH WASNT THE BEST! I TOLD HER I WILL BE CLOSING MY ACCOUNT ASAP TOO, AND SHE DIDNT ACT AS IF SHE CARED. I WILL TRY THE OTHER REALLY HIGH RATED CARDS. OTHER THAN THAT, IF WE WERE TO GO THROUGH WITH THE LOANS THAT I MENTIONED, WOULD IT MAKE SENSE? HOW BAD WILL IT HURT TO PAY OFF 5 ACCOUNTS, AND CLOSE 3 OF THOSE ACCOUNTS AFTER THEYRE PAID OFF? IM JUST REALLY CONFUSED, AND FRUSTRATED ABOUT WHY MY RATES ARE SO HIGH!! WE HAVE A MORTGAGE LOAN, WE JUST PAID OFF OUR CAR, WE DO HAVE TOO MANY CREDIT CARD ACCOUNTS, BUT WE PAY ON TIME, AND MORE THAN THE MINIMUM! I DONT UNDERSTAND HOW THESE CROOKS CAN DO THIS. THANKS FOR YOUR HELP!

i keep forgetting to write things that may help what advice you may have to give! my highest rate is 31%. wow!! how is that legal? i make every payment on time, and more than the minimum too!! i have a few that are at 29.99%, and all the rest are in the mid to high 20’s also! my wifes are all around 15-20%.

JJ, you might try calling your CC company and asking for a lower interest rate. Many people have had their interest rates slashed just by asking! You could mention something about the fact that you are a good customer and make your payments on time, and you have received other credit card offers in the mail with lower rates and are considering a balance transfer and switching companies. Chances are you will hang up for phone with a significantly lower interest rate than you had before. Just like any other company, they don’t want to lose your business and if they know you are considering other options, they will probably want to do their best to keep you as a customer. Give it a shot and see what happens! I’d love to hear the results if you get the chance to come back and give us an update.

Balance Transfer really helped me to save on interest. With $5000 amount transferred, I saved around $740 interest paid in 12 months. Once the 12 months period ended, I will repeat the Balance Transfer process with other credit card.

I have 3 cards at high interest rates (28%, 21% and 18%), combined the debt is about 18,500. I reached out to my credit union to figure out a way to pay off my debt sooner (to buy a house in the future) – I have 2 options (I have been approoved for both.)

Personal Loan at 12.99%

In both instances I would have to close my 3 current cards (they are at probably 60% debt), so my debt % would likeley go up b/c either the loan or the credit card would be at the top of the limit.

I’m not sure which option would be better on our credit scores. I plan on paying this debt off in 2 years, regardless of which option I choose. Long term, they both are going to be much better than my high interest cards. Just wondering if one looks better or affects my fico score more/less.

Dede, that’s tough to say for sure which one would be better for your credit score, but you’re absolutely right, both options are much better than the situation you are in now! Personally I would probably go for the personal loan, close the 3 cards you have now as you mentioned, and then maybe apply for another CC or get a prepaid card and keep the balance as low as possible on that account. As you probably know, your revolving debt to credit limit ratio (credit card debt to limit percentage) is a big factor in determining your credit score. The personal loan shouldn’t be considered a revolving account as a credit card would be, so to me it sounds safer that way.

Either way you go sounds like a good financial move at this stage, good luck!

I am recently married and my new bride has a credit card with a low limit and high interest along with monthly fees. If I add her to my credit card account and close hers, will it affect her credit or mine? I have a high limit, low interest, no monthly fees and have had this card for over 10 years. My credit score now is over 800.

Mike, I have had some experience with this sort of thing before, it should not affect your credit at all. But how it affects her credit depends on how long her CC account has been open, and you would have to consider any balances and how high her credit limit is on that card as well. I always try to keep old, good standing CC accounts open, if possible, because things like that look great on your credit report. But if your wife’s account is fairly new, considering your account is 10 years old and sounds like it’s in good standing, then it would probably benefit your wife’s credit to at least add her to your card. It certainly wouldn’t hurt to add her to your account, but as far as canceling her old account, I would need more info on that to get a better picture of what might happen. If keeping her old CC account open is an option, even after adding her to yours, you might want to consider that.

Just wanted to say thank you for this website and all the great informatin. I got my cc answer right away an proceded to the comments that were even more helpful. I just go a third cc of 2000$ and put 969$ on it and was a little worried about my score because the other card balances were 0$ of 1500$ and 800$ of 3200$. If I would have known sooner I would not have gotten the new card because Chase gave me checks to balance transfer, which I did and then I got nerveous after a few times and decided to try and get a 0 interest Discover card which I was happy and suprised to get on a fixed income. I’ts only 2000$, but that’s enough for me, it’s Discover! Anyway, thanks again and by the way my credit score was 753 at the time!

I want to pay my college fees with my citi card. Since, they are offering 0% apr on balance transfer, can i take a check from them on my name and pay my college fees instead of directly getting my credit card charged. This way i can get 0% on that purchase instead of my current 9.24%apr. Is this an option to me.

current balance $500

Shashi, apparently it could be an option for you. Here’s a good short article very closely related to what you’re describing : http://www.bargaineering.com/articles/cash-advance-vs-balance-transfer.html

I have a card with a high credit limit and a second card that is about a year old and the 0% is about to expire. Work has been bad and I’m going to start struggling with bills if I’m not careful. Would it hurt my credit to open another card to continue that 0% for another year? The balance is about 3500 and my credit is excellent. I just wonder if the money I save would be worth any hits I might take on my credit score.

With transferring balances, a lot of people worry excessively about the affect it might have on their credit score. If you have determined that it’s a good financial decision to apply for another 0% interest card which could bring much needed savings on interest, then I would go for it. Every time you open a new account your score will take a slight hit, but it’s only temporary. As mentioned above, that hit can be offset by an increase in total credit line if you are approved for a new CC and transfer your balances over, and don’t run up your balance(s) any higher. Higher credit line with the same utilization (CC balances) equals a lower utilization percentage, which is a good thing for your credit score. So if you can benefit financially it’s probably a good idea to go ahead with applying for another 0% CC.

Hi. I’m a college student who’s about to graduate. I’ve got 2 cards open with a credit line of $1750 and I’ve got $1600 on the cards. Current apr is about 14% each. I always make my monthly payments but my cards have been lingering near the maximum for about a year. Would it be beneficiary to open a 0% apr card and transfer all the balances to a new card? I don’t really need the larger credit line but would it help my credit score to have a lower debt percentage?

Tim, yes it would absolutely help your credit score to have a lower debt percentage, but keep in mind once your CC’s are nearly maxed out, especially without a long established credit history, it can prove to be very difficult to obtain any kind of new credit, including a credit card. You may want to try applying for a new CC as you mentioned, but don’t be surprised if you come up empty handed. High credit card balances usually send creditors running for the hills. If you are unable to obtain a new balance transfer credit card, you could try asking your current card issuer to raise your credit limit. But again don’t be surprised if your request is denied. If that happens, best thing to do is just work on paying down your balances and monitoring your credit score to see how it changes as your balance shrinks. Good luck!

I have one credit card “A” that is 75% maxed ($9,000 of $12,000 line). I have had this card since 1998 without ever making a late payment. Card “A” interest rate is 7.9%

I have another credit card “B” that I have had for a while but ALWAYS have paid off every month. It receives extremely rare use.

I have two other store cards (Sears & Home Depot) that I NEVER use and only signed up for in order to get a store promotion. They’ve been used once each but remain open. They also have zero balances.

I receive pre-approved offers every day from cards offering 0% for 21 months on balance transfers. I am considering transferring my entire balance from Card “A” over to this new card in order to save a lot of money on interest. However, the interest rate on this card after the 21 months is 12.99%.

I would like to save the hundreds of dollars in interest over those 21 months, and the $9,000 should be paid off by the end of that time. However, I’m concerned that opening this account and transferring the balance from Card “A” would hurt my credit score (which is 800+ right now).

Marc, it sounds like you have excellent credit and have made good choices in the past regarding your credit. My advice would be to go ahead and obtain the low interest card if you have determined that it’s a good financial decision, and to me it sounds like it is. The hit your credit score will take from opening the new account will be very light anyway, and your increased total credit limit will help offset that ding. It sounds like with your credit, you will have no trouble getting approved for such a credit card.

To be honest even if your score takes a 10 point hit from opening the new account, you will still have an excellent credit score, so it shouldn’t make a significant difference in terms of qualifying for the best interest rates on auto loans, mortgages, etc.

I have a credit card that I share with my mother (she is the primary on the card…but it is my card and only I use it and make monthly payments on it). The credit line on it is $29,000 and through college and afterward I managed to rack up about $6,500 on it. To lighten the burden on her credit, I transferred $4,000 of the balance onto a new Discover Credit card. This new card is maxed out because I transferred over what I was approved for.

I have run into the problem where as soon as I make a payment on my Discover Card, I turn around and spend that money to make ends meet. I have not paid this card down at all in the 6 months that I have had it. Right now, I have a $5 balance on it.

I have excellent credit, I have never paid anything late in my life, and now I am freaking out that this card is going to ruin everything that I have built. I have a brand new mortgage, student loans, furniture and electronics financed through a few places, etc.

What should I do with my Discover Card balance? Should I request a balance increase? Should I transfer some of the funds onto a new card?

Kirstin, I assume when you said that you have a $5 balance on your Discover card, you really meant that you have $5 in available credit on that card. I would definitely ask for a balance increase on that card, without knowing any other details it’s tough to predict the outcome of that request, but it’s definitely worth a try as it would help your debt-to-credit ratio, unless of course the increased credit line will tempt you to run up a higher balance, in which case it may not be the best idea. However, you mentioned that you are an authorized user on your mother’s card, which has a $6500 balance and a $29,000 limit. That would put the utilization percentage on that card at around 22% which is not bad at all. Overall if you add up the balances and limits on both of those cards, your utilization percentage sits at around 32%, which is not too shabby either. You’re worried about this debt to limit percentage ruining your credit, but if both accounts are reported to the credit bureaus under your name, you should be ok. Ideally you want your total utilization to stay under 25-30%, but if it’s slightly over that it’s not going to destroy your credit.

Now having said that, if you were to take your mother’s CC that you mentioned, out of the equation, then yes your credit score will take a plunge with your one remaining CC pretty much maxed out at nearly $4000. So if your mother plans to remove you as an authorized user on that account, then you have reason to worry. Otherwise obtaining more credit probably isn’t going to significantly improve your credit score. Hope this helps, good luck!

I wanted to get a bank loan to pay off my credit cards for 9.9%. I owe $27k and pay from 9.9 to 14.26 %. My debt to income ratio prevented the loan approval. I have never been late on any payment for the past 13 years. Excellent credit score, right? Such a loan would be $583 a month, I am now paying $1000 a month. Should I keep trying to get a bank to loan me the money?

Harry, I have been in your shoes and in my case once I was already up to my eyeballs in CC debt, no lender wanted to go anywhere near me. I won’t tell you not to keep trying to obtain a loan to pay off your CC debt, but what I will tell you is it’s unlikely you will be able to get such a loan with an interest rate lower than what you’re currently paying. Once a person has high CC balances lenders go running for the hills. Also, every time you apply for a loan, the lender will request your credit report and score, which is a hard inquiry and can lower your score even further. My best advice without knowing all details is to work hard on paying down your current balances and monitor your credit score to see how it changes as your balances go down.

I was wondering if when you make a payment on your credit card if the credit card company applies the payment to your higher interest rate debt first or do the apply it to the lowest? For example, I have a CC that I have 2000$ on that is currently 12.99% APR (Card A). I have another CC (Card B) that has 1500$ on it. Card A just offered me a 0% APR on balance transfers for a year. If I take the transfer and make payments on Card A will the payments go to the 0% promotional APR first, or will the payments be applied to the 12.99% APR debt first? Thank you in advance for your response.

Greg, Excellent question, and the answer comes with some good news. Effective Feb. 22, 2010 a federal credit card reform law, enacted in May 2009, requires that credit card companies must apply your entire payment, minus the required minimum payment amount, to the highest interest rate balance on your card. Before this law was enacted, CC companies could allocate your payments how they saw fit, even if it was applying your payments to the lowest interest balances first.

So this is how it should work now, say you make a $500 payment… first it’s applied to your minimum payment, then what’s left over is applied to your highest interest balances. So in your case the rest will be applied to your 12.99% APR debt. You can read more about this topic here.

Hello! I opened 2 secured cards 6 months ago in order in rebuild my credit and its working. I then got an offer for a Discover card and accepted it. My score has since gone up another 20 points. My average monthly balance is 10-25% of my total credit. I just received an offer from Chase diamond preferred with a 0% apr for 2 years. My goal is to raise my credit score so will accepting this offer benefit me? Thanks!

Michelle J., accepting the 0% for 2 years CC offer you mentioned and transferring your balances, If it makes financial sense to you, may be a good idea even though it’s not really part of your “raising credit score” goal. Unless you have been applying for a lot of credit recently your score is not likely to change much one way or the other, since the higher credit limit usually offsets the hit your score takes from the hard inquiry and the opening of a new account.

How long does a “hard” credit inquiry affect your credit? For example, if I applied for several cards 13 months ago, is that still affecting my credit score? Thanks.

dt, Hard inquiries are supposed to stay on your credit report for 2 years. However, recently I’ve read that FICO only considers them within the first year, and since you mentioned it’s been 13 months since you applied for a credit card, those inquiries should no longer be affecting your FICO credit score (the score that matters). Also keep in mind (for next time) that a hard inquiry, while not good for your credit score, doesn’t typically have a big effect on your score anyway. Probably in the 5-10 point range, for some this may be a significant difference, for others, not so much. Hope this helps!

I currently have 2 credit cards. One with Chase and one with Bank of America. I only have about $9,000 balance combined with both and my total limit combined is about $35,000. I was thinking about taking out another Chase card, that would be 0% interest for 12 months, and allow me to pay this off. The card is also a 1% cash back… Would that effect my credit negatively; to open another Chase card? Would it be advised to close the old one? I have pretty good credit now, so I don’t want to lower my score. (it is usually above 750) Thanks!

CT, Yes your credit score might take a slight hit by opening a new account such as a credit card. But if you have determined that it would be in your best interest to do so, the effect on your score would only be temporary and minor. I would recommend keeping your other credit card accounts open, as this will look better on your credit history to have older established credit accounts open and in good standing, and also it would provide you with a higher total credit limit, which will help your credit score.

Closing your old credit card accounts is not usually a good idea, especially if you have had the account for several years. If you close accounts like those, your credit age could look younger, which is not a good thing for your credit score. If you decide to close one or more of your old accounts, try to keep the oldest accounts open, the older the account the better. But as a general rule, try to keep all old accounts open, even if you don’t use them. If you find yourself tempted to use those accounts when you would not otherwise, consider cutting up those cards, that way there’s no temptation to run up the balance on impulse purchases. Another idea would be to put the card(s) in a bowl full of water, and freeze it. That could help curb those impulse purchases but also leave the card intact in case of an emergency (you could thaw the card out and use it if absolutely necessary).

I have a home depot card that is inactive because I’ve been out of the country for the past three years. How will reactivating my card affect my credit score? Is it best to keep my old account number or apply for a new card? Next year I plan on buying a house. Reactivating this account, I’m hoping, will improve my score. I plan on using this credit card after I purchase my house. Thanks.

Lynn, I’d recommend, if possible, to reactivate your home depot card. If there was a way to reactivate it instead of applying for a new card, you would have the benefit of that account having a longer history, 3 years instead of brand new. I don’t have any direct experience in reactivating a card like that, so I can’t really comment on whether you can do it or not, but I’d try that first before applying for a new one, even if you don’t plan to use it much, it would look good on your credit report. Good luck!

Ok, don’t have time to read much but am curios, for example, I have an offer already from an account (credit card) I already have had open for a few years. They are offering me a no -fe balance transfer and I would put about $1230 on the card, would that affect credit negatively?

Angie, simply transferring a balance from one card to another shouldn’t affect your credit score either way. No matter how you look at it, unless your limit on one card is being reduced, your over all utilization percentage should remain the same despite which cards you have the balances on. So in short, no, transferring a balance from one existing account to another existing account should not negatively affect your credit score. If you’ve done the math and determined that it’s in your best interest to do the balance transfer, then it’s probably a good idea to go ahead with it.

If I have 3 credit cards (low limits $900-$3000) with perfect payment history over the course of 3-5 years, with each card with balances of roughly 87-95% utilization. All other debts (car, rent etc) paid on time always. Will the high balances kill my credit score or is it possible to improve since my history is perfect?

John, yes the high balances will kill your credit score, high CC utilization percentage equals big hits to your score. The best and quickest way to improve your score is probably to work hard on paying down those balances, I always recommend people sign up for one of the credit monitoring services mentioned here and monitor your score as you pay down your balances. CC accounts are typically updated once a month when the statement is sent, so if you are able to pay down your balances on a monthly bases you will see quick improvement in your credit score and you can watch how it changes as time passes and you will be able to see what triggered those changes. I know this is probably what you wanted to hear, but other than paying your accounts down there’s not a lot you can do unless you can get your CC issuers to raise your credit limits. You might want to try that, but don’t count on it since your balances are already so high.

I have been actively trying to improve my credit score for the last few years. I was around 620 and when I applied for a personal loan at my credit union yesterday, my score was 737. I have one credit card (4,000 limit open since 2005) with a balance of $2900 being charged at 19.99 percent. The credit union is offering a 9.9 percent card and said I should apply for their card and one condition could be that I pay off and close the other card. The credit union rep said since the card was only from 2005, it would not be a negative on my credit to close it. Wouldn’t it be better to keep the old card (paid off and keep it at 0 balance, charge at least once a year and pay the balance off) and the new card? Or is it okay to close the old card?

Raquel, I would definitely recommend keeping the old card open and putting some charges on it occasionally (just to be safe, since I’ve heard of CC companies closing unused accounts after a period of no activity). If you had just opened the card in the past year, it might not make much difference on your credit score, but closing an account which is now at least 6 years old sounds risky. The older your accounts the better, and 6 years is not exactly a short period of time.

Does asking for a credit limit increase have an impact on your credit score?

Taylor, if you ask for a credit line increase, your CC company may want to pull your credit report before granting your request. If they do, it would ding your credit score a little as all hard inquiries on your credit will. However, if you are granted the credit line increase, and it benefits your credit utilization percentage enough (debt to total credit limit ratio), it could definitely be worth it.

The ill affects the inquiry has on your credit report will diminish with time, but f you are able to significantly raise your credit limit on your credit card, the long term benefits would most likely outweigh the ding your credit score took in order to get it done.

The ding your credit score will take from the inquiry is probably in the single digits, so it’s not a huge loss anyway.

thanks for the great advice – it’s difficult to learn how this credit card game is played. The rules keep changing.. great site.

I have pretty horrible credit already and a credit card that I am paying of that is closed. The interest rate is autrocious. I just opened a new credit card account explicitely for the purpose of increasing my credit to dept ratio and taking advantage of 0% balance transfer. In your opinion s that a mistake ?

Dawn, did the new credit card account raise your total credit limit significantly? If so, then it may have been a smart move especially considering the 0% balance transfer opportunity. Sometimes even if something like this could temporarily ding your credit score a little, it may be worth it if your savings is significant with the lower interest, especially as mentioned before, the increased credit limit could help offset the damage to your credit score.

I guess I need to add my intial..I see another Kim here! Should I give it back the cc since I never used it ?? Is that possible.

Kim C., I don’t think you can just refuse the credit card account after it has been opened and cards have been sent to you. You can close it though, or just keep it open and try again somewhere else. I’ve had that same thing happen to me, applied for a low interest card only to receive one with a high rate in the mail. In my case I was not able to obtain one with the low or zero interest due to my poor credit at the time, so I just had to deal with the high interest until I paid it off, but I certainly hope you have a better result than I did.

Did your cc balance already get transferred to the new card, or is that yet to come?

The card $5200 with a 2900 balance @ 15.99 I have a credit score of 786. I ask every month to lower percentage rate & they say that is all they have to offer right now. So I saw a chase card @ 0% for 6 months and %9.99- %21.99 after I applied & got the card they gave me a 17.99 card & a higher balance of $7200. I don’t want that deal..what can I do.

I do also have a $10,000 GoldOption loan still open but paid off, but again with a horrible rate. I do not know the difference between this and a credit card, as they sent me a card to use if I wanted, but is a type of revolving credit.

Have one credit card maxed (17,000) with high interest rate (27%). My credit rating is 722 and was able to get one card to transfer to with a $4000 limit. Would I kill my credit rating by trying this 3 more times? I can pay the current card off in 3 years by paying $731 a month. But if I can transfer these, and split the payments to $175 per card, I could have them paid off in 24 months, which would include the transfer fee (the $4000 limit card has 0% for 21 months). Ideas?

Amy, that’s a tricky situation because it is true that opening new accounts, and the hard inquiries on your credit that comes along with that, will lower your score slightly – maybe in the neighborhood of 10 points each. If you are approved for another credit card with a fairly high balance, this would increase your total credit limit on your revolving accounts, and may help offset the hit you took from opening the new account in the first place.

I would take into consideration any future plans to purchase a home, car, or any big ticket item like that and weigh your pro’s and con’s for the possible ding your credit score would take compared to the savings you could enjoy by transferring balances as you mentioned. If you do not plan to do any of these things within the next year or two, then the ding to your credit score probably won’t have any effect on you.

To answer your question, no it wouldn’t “kill” your credit score to do what you are considering, but keep in mind if you hit a brick wall while applying for new cards to transfer your balance to, try not to keep applying for more and more, if you are being turned down by all of them. At that point just focus on paying down your balances.

The good news is the quicker you can pay down your credit card balance, the quicker your score will go back up.

Is it correct that your credit score is based on your total debt percentage and that the agencies do not take into consideration which or how many cards are carrying the debt? For example, if I have 4 cards and one of those cards has the lowest interest rate, thus, I transfer all the balances to that one card, it won’t have an affect on my credit score? I’ve read somewhere that you should spread it out amongst your cards but if the other cards are at a higher rate, that doesn’t seem to be prudent.

Bill, from my experience, as far as your credit score goes, it doesn’t matter if your balances are spread out among many cards or consolidated into one, as long as your debt to credit limit percentage is the same. It’s about overall revolving credit (credit card account) management. If there are people who say it’s best for your credit score to spread out your balances over several credit card accounts, I’d love to see the proof. Drawing from my personal experience, I don’t agree with that.

Thank you so much for taking the time to help — that totally answers my questions!

I love you. This is really good advice, and people asked the same questions I wanted to know…. specifically Kim.

I have good/great credit, about 750. So I want to make sure I keep my score high…. I have 2 main credit cards. One with a $6500 limit, the other with a $5000 limit. I’m at about 87% utilization on my $5000 Wells Fargo card, and they have me at a 15.99% interest rate (Yozers, right. ) But then, here comes Chase to the rescue with a 0% balance transfer (10 months, it was initially 1 year) – or- 1.99% balance transfer ( 1.3 years, was initially 1.5 years) -or- 4.99% balance transfer (1.4 years, was initially 1.6). Soooo, I’m opting for the 0%, but I was wondering about the affect it would have on my credit so I looked up a few articles and they generally same the same thing, though there are some differences…

The main similarity I found in each article was about credit utilization: Which everyone states to just be sure to keep the balance transfer account open. Question: Do I have to tell them to keep the card open or will it just remain open?

The difference is some people say its better to have a $1000 debt on 3 cards (with $3000 limits), than a $3000 debt on one card (with a $3000 or $3500 limit). But you’re saying that at the end of the day it doesn’t really matter? (since the utilization ratio is the same).

Another question, are there fees on both cards when a balance is transferred ? Or just one?

Chloe, in my experience it does not matter if you have 3 credit cards all with balances, or just one, what matters is the credit utilization percentage (balance to total credit limit percentage).

The credit scoring systems look at how you manage your credit cards (revolving credit). They love to see zero balances on your credit cards, but since that’s usually unrealistic, as low as possible is always best. I would recommend having as few credit card accounts as possible.

Typically when you transfer balances there’s no need to close the account you are transferring the balance from, unless you request that it be closed, it should remain open without your request. As you mentioned that is best for your credit score.

As far as the transfer fees, you will need to find that out from your card issuers.

I have 3 credit cards. One is pretty much maxed out at 92% of the credit line, the other 2 are at about 13%. Both of my low balance cards are offering 0% balance transfers right now. Should I transfer the full balance of my higher rate, maxed out card to one of the 0% cards (this move would put me at about 90% on that card), or should I spread a partial transfer between the two 0% cards, leaving some on the higher rate, maxed out card? This would put me at about 39% utilization on the two 0% cards and leave me at about 49% on the original card. I would like to keep from lowering my credit score, but I’m not sure if those percentages on the 3 cards would be better, or if 90% on one card and nothing on the other two would be best. If it makes any difference, the transfer fees will take me 3-4 months to make up. Thanks for any help you can offer!

Kim, since you already have the credit card accounts in question (vs. obtaining new accounts for the purpose of the balance transfer), no matter which card(s) you keep your balances on, if your total revolving credit line utilization percentage remains the same, it won’t make a difference on your credit score.

However, you mentioned the balance transfer fees, so that would increase the percentage slightly. But if it’s a significant savings in interest, I would recommend choosing whichever option that could save you the most money and help you pay down your balances quicker, which is really your main goal here. But again, don’t worry about which option would be best for your credit score, you can move your balances all you want between your existing cards, your overall credit worthiness should remain the same regardless.

If I have a credit card that is maxed out at its limit but am interested in transferring my balance to a 0% intro APR in order to pay it down, are most offers likely to transfer the whole balance? Because if they only transfer part of the balance, I’m then left with 2 payments instead of one right?

Michelle, it depends on your situation. When I was in that same position, I could not get approved for a zero percent credit card to transfer my balance to. I applied for several, only to be denied each time.

If you currently have only one credit card, and it’s maxed out, it’s unlikely you will be approved for another credit card with a significant credit limit, unless you have a good, established credit history. Credit card companies love to give credit to people who don’t look like they need it, and unfortunately, sometimes the people who do need it, get the short end of the stick.

You can definitely try applying for some zero interest cards, but unless you have outstanding credit, it’s likely that you will need to pay down your balance to somewhere around 50% (or lower) of your credit limit before creditors will be willing to extend you more credit.

That was my experience, but I certainly wish you the best and hope you have better luck than I did!

Thank you so much for your help, I really appreciate your help!

Thank you so much! When asking for a credit limit increase, if they tell you that they are going to need to run your credit, does that have the same effect as your credit getting run when applying for a new card?

Ana, it really depends on the situation. If you call and ask for a credit line increase and they grant you the increase without asking detailed financial/income questions, then they probably won’t check your credit. But if they ask for more personal info, such as employer and income info, monthly mortgage and other specifics like that, then they will most likely check your credit which would have the same adverse effect as applying for a new card. However, the damage this will cause is minor and will go away with some time.

Depending on the balance you are carrying on your current card, if it is high, I’m guessing they will check your credit first, but it’s still probably the best place to start.

They love to give their customers more credit when they don’t look like they need it, so it makes sense to expect it to be a little harder if it appears that you actually need the extra credit line.

If we need more available credit (about $3000), is it better to ask for a credit limit increase on a current card, or open a new credit card? My assumption would be that a new credit card would come with a higher limit than the amount that a current creditor would be willing to increase your credit line by, therefore creating a lower debt ratio overall, but I’m not sure which would reflect more poorly on the credit report?

Ana, I would first try asking your current credit card company about increasing your line of credit. It would probably look better on your credit report that way since you would not be opening any new accounts with hard inquiries on your credit report.

If they deny your request, you may have trouble obtaining a new credit card with a credit line as large as you mentioned. But you can certainly try, just keep in mind every time you apply for an account, they will check your credit, which will ding it a little. If you apply for several cards and are turned down, each one if those will ding your credit as well. So try once or twice and if nothing happens, you may want to think about working on paying your current card down before applying for more.

I was in the same boat years ago, and didn’t have any luck, had to work on paying down the accounts I already had first. But your situation may be different. Good luck!

when you apply for a new credit card, will the credit card company tell you the new limit? Do they tell you the limit before you tell them how much you want to transfer over?

Adam, unfortunately in my experience they do not tell you your credit limit before they approve your credit card account for a balance transfer. But the good news is you can keep your old account open (the one you are transferring the balance from) which will improve your balance to credit limit ratio. If possible just leave the old account open with a zero balance. If you are tempted to use the credit card, just cut the card up, that way you have the benefit of the increased credit limit without the temptation of running up more debt.

Agreed– this was very helpful!

Great advice and right on the money too! I was in the same predicament and came close to closing my original credit line (with a higher credit line). But after I read the article, I was better informed and made a great decision about leaving both credit cards open. My debt percentage is now 22% of my total credit line and my score was not affected negatively.


How Much Does Canceling Credit Cards Affect Your Credit Score?

This article is by staff writer Adam Baker, whose own blog paid homage to the movie, Fight Club, with the post Tyler Durden’s Guide to Personal Finance.

While I generally check my free credit report every 4 months or so, the last time I checked my credit score was November 2008. At that time, it was right at 740. Earlier this week, I checked my credit score again. I was pleasantly surprised to find out it was 730+!

Why would I be pleasantly surprised that my credit score has dropped between 5-10 points over the last 16 months? Because that’s when we stopped playing the credit game.

In early November 2008, Courtney and I not only canceled our credit cards, but also paid off our only non-student installment loan. The following month, we decided to take it a step further and close our final remaining credit card.

For the last 15 months, we’ve lived free of credit cards, other revolving credit, and traditional installment loans. (We still have student loans). While this has had an overwhelming positive affect on our financial life, it was supposed to have a dramatically negative affect on our credit scores.

Will requesting a credit line increase affect my credit score

According to the graph and the information on the site, we have several strikes against us:

  • The length of our active accounts would obviously be affected. Several of our gas credit cards were 4-5 years old. Canceling them reset the length of our active revolving loans back to zero.
  • The type of credit used would be less diverse. We didn’t have a mortgage and now didn’t have any active revolving credit, either. I’ve read that FICO likes to see an installment loan that isn’t a student loan (for example, an auto, jewelry, or personal loan). We’re now lacking that, as well.
  • Our overall credit limits were all but eliminated. Previously, we had close to $15,000 in credit card limits. This was obviously reduced to $0 by closing the accounts.

To be fair, we did have several factors working for us:

  • Canceling our credit cards didn’t increase our utilization rate (the percentage of our limits we actually use). When you don’t have a balance, the utilization rate will always be zero, whether your limits are $10k or $0.
  • My payment history has no negative marks. It’s certainly possible that my punishment for canceling my accounts may have been augmented had my history shown several negative marks. A clean payment history may help counteract the downside of canceling the accounts.
  • We have no dings from new forms of credit. In addition to closing our accounts, we also chose to place a credit report freeze on both of our reports. As a result, we’ve had very few (if any) checks on our credit and certainly no newly opened accounts.

[Article Continued Below….]

Could my credit score be even higher?

It’s very possible that even though my credit score hasn’t tanked, it could be much higher. Had I not canceled my credit cards, maybe my score would be 750+ or 760+! There’s no way to know for sure, but canceling my credit cards may have caused my score to stagnate.

Another possibility is that FICO’s algorithm may still need more time before it begins to punish my “negative” behavior. I find this theory less likely, as it’s been well over a year. Over time, maybe the score will slip more dramatically.

On that note, if we keep up our current pace, we’ll eventually cease to have a credit score at all! It can be argued whether this is good or bad, however you’ll be hard pressed to convince me that executing our current plan for another 5 years will put us in a bad position financially.

So what does this all mean for you?

It’s important not to draw any sweeping conclusions from a single example. I fully expected my credit score to drop more than a mere 5-10 points, based on the information I’ve been reading for the past two years. It would be irresponsible to assume canceling your own credit cards would yield a decrease or an increase in your score based on my results.

At the same time, my sample case study has caused me to reevaluate just how much we know about the algorithm used for calculating your credit score. After all, no one knows the exact formula. All we have are graphs and lists of potentials factors that may be taken into consideration.

The only universal lesson that can be extracted from this is to ensure that an estimated change in your credit score isn’t the primary influence on your major financial decisions.

Of course, you should have any and all information you can. I’m not suggesting we should all ignore the information that is available about the make-up of credit scores. You should absolutely consider it. Just be wary of letting it dictate any major financial decisions on its own.

A week ago, I considered myself fairly savvy on the topic of credit scores. Today, I’m not so sure anymore!

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I’ve heard of this situation happening a few times before. Thanks for sharing your story!

Does anyone else see the humor in that the advertisements on this page are for CREDIT CARDS? Just checking, and thanks for the information it is very insightful.

With credit lines becoming increasing hard to get, why cut off your ability to access those lines of credit? (Given there aren’t annual fees or inactivity fees) I know that you might not plan on using those credit cards, but usually when people need money they didn’t plan on needing it. I view it as a hedge against emergency situations for those times when you immediately need more money but don’t have time to find other sources. One argument might be, I have plenty of credit on my existing credit cards for those situations, well that is true, but if you had to use that you would then have very high credit utilization rates, which would hurt your credit.

Please remember that you should have 6 months to 12 months of savings for emergency purposes. I’m talking about extreme situations when you might need more than these savings could cover.

Another European here, greatly confused by the American system. If I understand it correctly, banks (and even employers and utility companies) make their decisions based on this credit score? And the score is calculated based on the amount of credit that you had, where more credit is better?

Here, in the Netherlands, there’s a central registration of all credit you have. If you apply for a mortgage, credit card or other type of credit, the bank decides based on your income, the amount of current credit you have, and ‘incidents’ in the last 5-10 years (like missed payments). Depending on the type of incident, it will either raise the interest rate, or the loan will be rejected.

I don’t see why having more credit would be beneficial, except for the bank. It looks like with ‘credit scores’, you’re forced to take more credit (early in life), to make sure that you can get a mortgage or loan later? Sounds like a very convenient way of selling more credit, but how is this in the interest of the public? Are banks forced to use this system? Wouldn’t that be considered a cartel?

This article is fascinating, and I’d love to see more information on folks who have canceled their credit cards!

I’m very annoyed that i’ve never been able to find a straight yes-or-no answer to the question of whether closing my single credit card would seriously damage my score.

My score has absolutely nothing to penalize it except the fact that my credit card account is still considered ‘young’ (it’s several years old at this point). I’ve co-signed on one auto loan that was paid off early, co-signed on the mortgage with my husband, and have one credit card that I’ve never even made an interest payment on (I’m a ‘deadbeat’ who has always paid it off as soon as a charge hits it).

I would hope that being on a mortgage would mean my score would stay constant and would not dissapear over time, but I just don’t know. It’s extemely frustrating to deal with such a murky system.

As a European, I think the idea behind the credit scores is rather strange. Here, every loan application is evaluated individually, mostly based on the person’s income, family status etc. I think there is also kind of a ‘black list’ for bad debtors. Now take for example my own situation. I am still a student. Here in Belgium studying is very cheap, so I don’t have any student loans. When I graduate this year, I will look for work and hopefully find it soon. For ease of thought, just say that I’ll find a rather well-paid job. I will try to save some money the first few years and not to borrow a lot of money (if any at all). After some years I will take a mortgage and buy an apartment or a home, which shouldn’t be any problem, considering my descent pay scale, the money I’ve saved and the fact that I don’t have any other loans. If I understand correctly, the fact that I have no credit history would probably retain me from getting a mortgage in the States. So Americans are in fact encouraged to borrow as much as they can afford to pay off, which is often difficult to asses in advance. I can’t help thinking that must have been one of the major factors causing the crisis…

I’m confused. Maybe I read the post too fast.

Why would canceling your cards be such a big deal if you were never carrying any balances? If you look at the graph, the smallest % of impact to your overall credit score is types of credit used. Having your account closed doesn’t mean the tradelines will be wiped from your credit history. Your past on-time payment etc. are all still there.

Credit score is actually very simple but people seem to think too much into it at times. You don’t even need to consider the % Fair Isaac throws at you. At its core, credit score is a measurement of your credit worthiness. If you’ve handled credit responsibly in the past, then your credit score should reflect that. Canceling cards doesn’t mean all of a sudden your past actions have been wiped.

If you’re responsible with credit usage, credit score etc. should never been a factor to you. You wouldn’t even have to worry about it too much. I’ve had plenty of friends who never bother to check their score, fiddle with various credit cards, worry about debit cards etc. They just pay their bills when it comes.

Their credit scores, are of course, impeccable. As it should be.

Though I never understand why someone would either: 1. apply for a crapload of credit cards or 2. cancel all credit cards — people do whatever works for them. Personally I think most people don’t need to go with any extreme. Again, your score reflects your credit worthiness. If you’re responsible, your scores are fine.

Years ago I was told that you shouldn’t have so many open accounts, because when you apply for credit or for a mortgage, they look at how many open credit lines you have, assume you have access to “X” amount of credit, and THAT affects your ability to acquire additional credit, a mortgage, whatever. NOW, lately, we’re told that you shouldn’t close accounts. Well, having a lot of open accounts with nothing on them makes no sense at all to me! I wish people would realize that the banks control all of this. As soon as I get my cc paid off (which we are working on diligently), I will close every, single open, unused account I have, and frankly I don’t care what effect it has on my credit score!

i think the problem for some people here is that they have no will power. if they have a credit card, they will spend money compulsively. so then the problem is not with the credit card but the people who can not control their temptation or habit.

@Metroknow. It is true, you have a lot more protection when you purchase with a credit card online or really anywhere than with a debit card. Although if you make a signature-based debit card purchase, you get many of the same protections that you do when using a credit card.

I’m in my 40s. Having lived this lifestyle back in the &0’s…when I was uninformed about credit, FICO, and the credit fairy coming to save my score (I love that commercial)and canceled all my credit cards…I can tell people definitively: YOU’LL BE SORRY 10 YEARS FROM NOW!

Credit history is not something you should treat lightly by canceling old, established credit lines. When those closed accounts age off your credit file 10 years from now, and you have the credit history of a 21 year old at best (or none at all = disaster), you’re gonna rue the day you made such a choice. You can’t rebuild/replace your hard-earned credit history easily. Credit and FICO, like it or not, are crucial tools in our society. Length of history counts for more in the real world than just its weighted FICO percentage…it can be used to establish your character in business. Treat your credit as a valuable asset, learn to manage debt, and reap the rewards.

For the record, whether a credit line is open/closed only matters in FICO with regard to utilization percentages. i.e….when you’re carrying revolving debt. It will not tank your score to close all your credit cards if you have no revolving debt. It hurts you…really, really hurts you…when those aged accounts fall off your credit file in 10 years. Think long term…building credit and reaping the rewards is a marathon, not a sprint. In the meantime, do read up on Fair Isaac’s website regarding FICO and how it’s calculated. Google is your friend for searching out information. There are misleading assumptions in the above article. Good luck to all of you.

I’m really shocked that so many “financially conservative” people advocate using a debit card in lieu of a credit card. Why would you risk people getting access to your true money?

Also, in response to “self-made millionaire” comment (#&6)…I recall Ben Stein said that he does all his normal spending on cash back/rewards cards and pays them off every month. Here, I found the quote:

Mr. Stein does use credit cards out of convenience and pays off the balance each month. Here’s a transcript from Frontline’s special on credit cards:

NARRATOR: Stein says he charges thousands of dollars a month in business expenses on his credit cards.

BEN STEIN: I use all their good services, and they don’t make any money from me. I mean, none to speak of.

NARRATOR: The credit card companies do make a percentage on each transaction, but Stein is not their ideal customer because, like 55 million Americans, he pays his bills off every month and doesn’t pay any interest.

BEN STEIN: The credit card companies hate people like me, who pay off our bills every month. And I know that because I ran into a fellow I went to high school with on the street, and he told me he worked for a credit card company. And I told him about how much I use credit cards and how I pay them off every month, and he said, “Oh, we hate you. We hate you guys. We call you deadbeats.”

I canceled a card that was used just for Wachovia overdraft protection. I fired Wachovia and moved to USAA. I no longer need the overdraft credit card, so I decided to cancel it yesterday.

I have a 790 now, I’ll update you if this changes.

Most of the comments here have not touched on my reasons for not using credit cards.

1)Credit card companies cannot be trusted. They’re lousy companies. Not “evil”- just bad at what they do.

2)The FICO score is an “I love debt” score. Want a good score? Borrow a lot of money and pay it back on time. Repeat.

I’ve lived without credit cards since 1998. I travel, rent cars, stay in hotels. Never had an issue with the debit card.

The “hassle” factor is not an effective argument in favor of- it’s an excuse to keep a crutch. In a society where identity theft is the fastest rising white-collar crime out there, holding a credit account is a financial risk… one that I’m not willing, nor do I need, to take.

One last thing- find a self-made millionaire.. ask him if he got there with “cashback” and “air miles” and other nonsense…betcha he says no.

Lupe, I’d be curious to know how your debt of $106,000 is the bank’s fault also.

Lupe: Please share your story, I am interested to know how it is the banks fault that you owe 106,000.

I also agree with the commenter above – I don’t want to encourage anyone to file bankruptcy. I know people that have and its similar to a really overweight person getting surgery to remove the fat. It may be gone temporarily but if you don’t fix the root of the problem, it will all come back. You have to learn from your mistakes and filing bankruptcy doesn’t teach you anything.

“If you have cut up the card and are not using it, and suspicious activity happens on the card, they will likely call you to investigate. Even if they don’t, they will send you the bill and you will say “Hey, I don’t use this card” and call them, and they will remove the fraud charges and track down the theif and send you new cards (which you can then cut up).:

This process is not as simple as it may seem. For anyone who has been a legitimate victim of fraud (my wife included) it’s an absolute mess.

It’s a lengthy process to get it resolved and it requires you to hold onto all the paperwork for the next 10 years. Courtney’s credit has the fraud pop back on at least once every 12-18 months, which requires us to refax the documents to have it removed.

Unfortunately, this isn’t uncommon. It’s common knowledge in fraud circles that this stuff has a history of being rereported.

If the timing happens to be before you do use credit (for a house or car loan, etc…) fraudulent activity on an account could stall or completely screw up the loan. Stalling a loan could cause in rate hikes if the base changes and deadlines are missed.

In addition, many credit card companies now have fees in *inactivity*. You are also exposed to a ton more junk mail, including account changes, terms of service changes, and “new” offers.

Checking your credit reports for errors (I think it’s like 78% have errors) is also more complicated. You’re simply exposed on many more fronts.

Point being, a real case of fraud often requires hours of work, sometimes over multiple years. It sucks.

The whole FICO system is an idiotic scam. The only way to have a good score is to be in debt!

I’ve always read about canceling your credit cards and how that affects your score, what about if my credit card expires later this year? If I renew with a new card but same carrier (Citi) will that credit history continue? If that closes and I open a new one, will it be like starting all over?

@Lisa “I’m not sure cutting up a credit card would prevent useage. I mean, it might prevent useage from the owner but who is to say it prevents fraudulent activity? Cancelling the card/account is much safer than just cutting up the card. We have had fraudulent activity on our cards and were told that thieves now have computer generated numbers. Sometimes they get the right sequence and Bingo! Frauduent activity abounds. Lucky us….”

Really? Credit card fraud on a cut up card? You think this is something to keep you awake at night? If you have cut up the card and are not using it, and suspicious activity happens on the card, they will likely call you to investigate. Even if they don’t, they will send you the bill and you will say “Hey, I don’t use this card” and call them, and they will remove the fraud charges and track down the theif and send you new cards (which you can then cut up).

Your logic on this point is pretty terrible, sorry to say.

As for your parents not being able to rent a car without a credit card, thank you for your example. That’s exactly what I said. There are times when not having a card is a huge hassle, like when you need to rent a car on vacation.

I agree with your point on responsibilty and usage. People who can’t help themselves shouldn’t be allowed near credit cards. They should probably also get help for their compulsions/addictions from a professional, or try growing up and acting responsibly. Its not the “evil” credit card company’s fault though, but their own sickness/weakness.

To VNG’s point about using a debit card to book hotels and rental cars……risky. You have no recourse should something go amiss using a debit card. Use a credit card to reserve and the debit to pay. Much safer.

Now, what I find interesting is not too many years ago the FICO score was hurt by having too many revolving charge accounts. (too many was never defined to me). I closed many of my store and speciality accounts because all took other forms such as MC, Visa, AX, etc. Lo and behold about that time the rules changed and now if you don’t have enough revolving credit it hurts you…….again, how much is enough?

I, like some of you, have put a credit freeze on my credit report. I get a strong feeling the credit bureaus don’t like it. They make it very difficult to get information on yourself. I don’t for one second believe it is totally because of security. I believe it is to frustrate the user enough to get us to lift it. Don’t they get paid everytime someone accesses our reports?

Like one writer here put it I believe that mostly this is a scam. I believe there is a need for some type of monitoring but I believe the current system is manipulated too much by outside forces and not based on unbias data.

The reason those of us with good credit histories don’t have the “sterling” score is because it isn’t in anybody’s best interest except ours. Hence I have little faith in the scoring system. I have little faith in something I ultimately can’t control and in anything that the rules can change at a whim. Especially those whims that seem to give credit card companies carte blanche over the consumer.

I believe there is a need and a service that credit cards serve and I’m all for free enterprise but not financial rape. If the Mafia did what the credit card companies have been allowed to do it would be called loan sharking.

Credit cards should be used with caution just like feeding a shark……be ever mindful and don’t take your eyes off them.

I moved to the UK from Europe in 2005. I asked my new bank, Lloyds TSB, for a credit card (mainly to book hotels online etc, I always pay everything at the end of the month). They answered they couldn’t give me one because I didn’t have a credit score in the UK (the cocnept doesn’t exist in my home country), and that building one can takes months, if not years. My income was very good btw, and i had no debts whatsoever.

The person in the bank explained she only knew of one trick to get a good credit score fast: take out a small personal loan at the bank of a coupe of 1000 GBP, and repay it within a year by monthly installments. This would show I’m a reliable person who pays back his loans, and would quickly give me a good credit score. She even wanted to assist me in setting this up (so that’s the same bank refusing me a credit card!). I obviously refused, and managed to find another solution for my credit card problem.

When we tried to get a car loan, I never had a credit card but my husband had one since he started college and had a credit score. Luckily, the salesman told us that not having a credit score wasn’t bad. So we were able to get a car loan under my name. I don’t think we paid an outrageous deposit for the car since we were paying half in cash in the first place.

My parents, on the other hand, wanted to go to Vegas and rent a car. The car rental would not let them rent without a credit card… They didn’t say anything to them about putting a large deposit down. They said that no credit card=no rental. Period. So they signed up for one. Mom pays in full every month, unless she forgets ccassionally. I have no idea what her score is at this point or if it even matters.

Banks did not put people in credit hell. People signed up for a loan and agreed to the terms and interest rates. The banks simply obliged.

I’m not sure cutting up a credit card would prevent useage. I mean, it might prevent useage from the owner but who is to say it prevents fraudulent activity? Cancelling the card/account is much safer than just cutting up the card. We have had fraudulent activity on our cards and were told that thieves now have computer generated numbers. Sometimes they get the right sequence and Bingo! Frauduent activity abounds. Lucky us….

My last comment is in regards to saying people who avoid credit cards in order to stay financially stable are irresponsible because it shows they can’t handle the aspects of using cards. My reply is: Know your limitations. A recovering alcoholic is not irresponsible if he avoids temptation. If anything, he is being responsible to himself by not putting himself in a position that may tempt him back into drinking. Same thing with credit cards. If you know that they are a problem, avoid them like all get-out and guess what? Problem avoided. I do that to my In-Laws on occassion…..

We have had our share of sorrows with credit cards and although we have not cancelled them we have paid them and shelved them away.

We are not planning to use them and we understand thst zero balance for a long time may be a negative score however we are not willing to travel the credit card debt again.

We have sizeable student loans and that is where our efforts are focused.

As I understand it, rather than cancelling them, you should break them out every few months or so, charge something minor and pay off the balance.

Interesting posts here. Years ago, I used to work for a credit card company as a modeler – I developed models that were very similar to the FICO scoring model (although not exactly the same). A few thoughts:

– As you can guess, I personally believe it’s pretty important to maintain a good credit score. Doing so makes life a lot easier, in my opinion. As a lot of posters have noted, you certainly CAN get by without one, the same way you can go without owning a car – technically possible, and even advisable for some people, but not the solution for everybody.

– One poster commented a few times on the idea that you should focus on your own behavior, not the score that results from it (the “scores are for games” guy). This is true, and for the most part your score will work itself out and is just a reflection on how risky FICO believes it is to lend you money, based on collective experience with people with similar borrowing histories. BUT… one very serious issue is the quality of the data being shared about you. In this regard, you absolutely SHOULD make an effort to be sure that your score is accurate.

– An example of the last point is the basic premise of this article. Contrary to popular belief, it is not a bad thing to close a credit card. You do have to worry about utilization, but assuming you’re not maxed out on your other cards, it won’t hurt you. But banks report a “reason code” for why your card was closed, and if that isn’t accurate, it CAN hurt you. “Closed by lender” is very different in the scoring algorithms than “closed by borrower”, and the former will hurt you. As you can imagine, the banks are not terribly diligent about how they report former customers’ information, and often get this wrong. They also often cease to report closed accounts altogether, meaning that (like me) you might have what looks like a current account on your credit history, with a balance but no deliquencies, that you closed two years ago. FICO is presumably sophisticated enough to weed these out, but who really knows? You should make sure your info is as accurate as possible.

– Also, your credit history goes back to when you opened your FIRST account, not your oldest active account. So you shouldn’t keep an account open just to maintain the age of your credit history – that’s already there and won’t change.

I haven’t worked in that field in a long time, so for all I know the models might now be created by genetically engineering baboons on a secret research satellite or something… but the gist of what I learned there was to focus on your own good, responsible management of your money, while at the same time maintaining a healthy skepticism that will help you ensure that you receive the benefits to which you’re entitled by doing so.

Good luck to all, however you decide to manage your financial lives.

I would echo those who have said that you should focus on being responsible rather than a particular score. I work for a bank and we have our own scoring model we developed. We do not use FICO. This is much more common than people are aware. Is your score important? Yes. Is your particular *FICO* score important? No, not really. Be responsible, pay on time, you’ll be fine. Don’t try to cheat the system by figuring out exactly how FICO does their modeling.

This is a very interesting observation. I would expect your FICO score to tank more than 5-10 points if you cancel all your credit cards. I’ve been having a couple of cards for years and I never intend to cancel any of them – I just keep all of them active by putting at least one monthly subscription on every card.

Not sure what your financial plans will be in the future, but having no credit score is definitely a risky bet, unless if you really can’t control yourself when it comes to using credit card – then it might make sense.

Come to think of it I should go check my credit score soon, that’s a great reminder. Thanks Adam!

Why isn’t this considered a monopoly? FICO has a SECRET algorithm that NO ONE is allowed to know. Yet it is used by everyone out there (creditors) to judge our worthiness. How is this even close to fair?

Shouldn’t we be allowed, if we’re going to be judged, to know HOW we’re being judged? Yes, the graphs and charts at FICO are all pretty. But, someone needs to sue these people and make them show their real algorithm. How is this fair to ANY consumer to be judged in a black box?

@Lupe I cant believe that the banks are to blame for living beyond your means or that notion could even cross your mind.

@Manfred – I wish people wouldn’t encourage bankruptcy because I and others that pay our bills on time, and keep our credit card balances to less than about 1% of our annual income, get to pay for all of the bankruptcies filed by the people without any restraint.

I couldn’t even fathom having a credit card bill at 2.5 times my income, right now our bill is about 1.5% of what we make in a year and I’m about to have a heart attack

I haven’t had a credit card since 1989. I owe no in the world a dime. I have letters (August 2009)from Experian, Trans Union, and Equifax that state they have no idea who I am.

It’s not nearly as cool as it sounds.

Like #42 said ‘when you need to do something like this that requires a credit check and you don’t exist in the databases, the customer service people get all hushed and confused. I don’t know what shows up on their little screens, but it must be scary-looking.’

Indeed-people do not know what to do when you are 40 something and have NO credit report.

Rewards are usually paid through the fees that merchants pay to accept credit cards…that’s why it costs a merchant more to accept a Discover card than Master Card. Discover has better rewards. The merchants take these fees into account when pricing their merchandise. I rather get the rewards I’m paying for than just wave goodbye.

Credit cards are not evil. They are a business. You don’t have to use them just like you aren’t forced to shop at specific stores. I like being able to see where my money went since cash seems to fly out of my wallet when I’m not looking…

I’m in total agreement with #73. The fact that the FICO score can be used in such a prejudicial manner is absolutely outrageous. However, it’s par for the course in this nation, owned and run for the benefit of large corporations.

Not everyone who is thinking about living entirely without credit is just too irresponsible to pay off their cards. We have a couple that are open, but I’m too intimidated by the FICO bullies to close them. We haven’t paid interest in a couple of years. I’m working on letting that go. There are people who just think credit cards are blood-sucking monsters who are immoral and unethical. I’d put myself into that camp. I would never sign up for a rewards card. They pay those rewards by trapping the poor into a cycle of never ending debt. That’s what funds those rewards. Yes, the people who use the cards bear much of the blame, but not all of it. I don’t want anything to do with that scene.

How did the banks cause you to be in $106,000 in credit card debt? Did they force a purchase on you?

I agree that the interest rates are ridiculous, but no one forces anyone to carry a balance.

Knowing your credit score can keep you from being manipulated by the salesmen.

I knew my husband’s credit score when we were buying a used car in 2008, but they assumed we didn’t and offered a 6.9% interest loan. I literally said, “Our credit score is 785 and I’ll get a much better rate at our bank. Thanks for your time.” They immediately lowered the offered rate to 4.1% (which was lower than I got preapproved for from our bank the day before).

That’s how knowing your credit score can help. Knowledge is power. Period.

@Lupe Contreras. Please, file for bankruptcy. Bankruptcy is a part of our debt laws for exactly your situation. The credit card companies take into account the risk from bankruptcies. No one will be upset and you will feel a burden lifted off your shoulders. Please file for bankruptcy. That is the way the system works. Don’t feel sorry for the credit card companies, they don’t feel sorry for you.

My fiancee is a bankruptcy attorney and she routinely sees people come in who should have come in many years ago. It breaks my heart to see people struggling for so long when the solution is right there. And whatever you do, do NOT withdraw retirement funds (IRAs, etc) to pay down debt. Under bankruptcy laws, retirement funds are protected (cannot be taken away from you).

Please file for bankruptcy. Even knowing just the numbers of your debt and your income, my heart is crushed.

Please people, be more willing to confront the tyranny of FICO. It’s a sham (private mysterious algorithm) to perpetuate the scourge of over-consumption. I applaud Adam for his courage to take a beating as he pursues the high-road. Many of us are not that strong. Importantly, the more of us who refuse to play this immoral game, the less hold FICO will have on the functioning of our financial culture. FICO is one of the biggest evils of our society today and DEMANDS our consternation. Don’t call me bitter; my score is 820. Better, call me a hypocrite.

Adam (Baker) – interesting you should post this – I was wondering about this recently. I wouldn’t ever cancel every single card (I have 2 right now), but I was curious as to how bad it would be if I cancelled one of them.

I forgot about car loans. I didn’t realize credit score affected insurance rates. I don’t see why that would be, but thanks for the info!

I first encountered the idea of living your life without credit in Ramsey’s TMM. I railed against the idea; it was analogous to having intellectual convulsions. However, once I gave some serious thought to the proposition, I realized it’s possible. We only have one credit card with what I would assume is an average limit ($4K), over 95% of the balance just sits there because we pay just the minimum payment or a little over until we have a couple of hundred dollars purchasing power and we spend it quickly and mindlessly. The harsh, cold, and unforgiving reality is that we live without credit now, what we live with is servicing that debt. DH and I are now on the road to becoming more fiscally mature, so we will probably get an AMEX card that obligates you to pay everything off in thirty days and retain a credit card for travel and online purchases, I agree with the sentiments express by poster #37.

Could you give some examples of the alternative means available that you use? I had no idea this was actually an option.

@Lupe #55 Did the banks really get you into this? Are they really responsible or could it possibly be that you made some bad decisions and they were more than happy to fulfill what you wanted?

I’d love to hear the story because I think it beats any other credit card story I have ever heard.

Paul @65 Citibank is just doing awful things to their cardholders and it is a sign of how weak they are: Same thing 16 years with them and they wanted to Jack my rate. Told them where to put it. Bank of America was more than happy to increase lines to take their business and keep a low rate.

With regard to employment, Credit Scores are mostly used to see irresponsible behaviors. We used it to a limited degree with roles that involved finance and accounting. We looked for things like bankruptcies and large writeoffs. The one thing we never assigned any value to were medical expenses being late. We never actually looked at a credit score, just the underlying issues if there were any. And this was used only for people that worked in the flow of money.

Once you have a mortgage that you pay on time, the value of both your credit score and your credit cards contribution to them is pretty limited. At current rates, the likelihood of refinancing is extremely limited and with the market likely to be in the tank for years (check out today’s new home sales numbers…ouch!), most will just sit tight.

I think a bit too much is being made out of the credit card / no credit card issue. Do what you are comfortable with. Lots of people use credit cards with no issues but many people like Lupe in #55 end up in serious trouble. Know thyself.

I found out in January that you have to wait a whole year(365 days) to get your free reports. I checked mine for free in Feb. 2009, so I had to wait until the exact date in Feb. 2010. Which reminds me, I should check them for free! Not that I care that much, but I may need to refi out of an ARM in 4 years, so i guess I will keep my score up. I have no CC debt, but have left them open. I occasionally buy something online and use a credit card to pay. Having the balance freaks me out, even if it’s $20, so I pay it back within a day or two. I don’t like to go to work to pay for the past. I would rather work and save for the future and spend today what I have earned.

To the reader who suggested just cutting up your cards instead of taking the time to formally cancel them, thereby avoiding a possible black mark on their credit score. Not a bad idea and I have done that in the past as well.

Those good ole days are gone now….I’ve just been notified from CITIBANK that my Platinum Select Mastercard, which I have had for 17 years, is now going be charged at $60 per annum and the only way to avoid that is to acquire annual purchases of at least $2400, at which time they will refund the annual fee. The alternative they state is to Opt out and close the account.

Well, you know what I say to that? I will not be bullied into spending money so that CITIBANK can make add’l merchant fees each time I make a transaction. I have always used the card occasionally over the years to keep it active but always paid in full each month. They did not offer any cash back incentives, so I used other cards I have that do. I guess since they did not make any money off me in interest, they try the recoup with merchant fees.

Btw, I just applied for a mortgage loan and learned that my credit score is over 800. I don’t know how much it may fall, if any, by telling CITIBANK to shine on…but according to most of what’s been said here, I probably should not worry. CITIBANK can have their card back and I will have 60 bucks extra to put towards the down-payment. How’s that for getting rich slowly. Cheers everybody!