23 replies to this topic

[TammyB]

So DH and I were talking today, and I'm trying to figure how which way is better for us. So I was hoping someone knows and can offer some advise.

So say DH and I have several credit cards most of them with a zero balance but say if we were to max them all out we could charge say 50k. Would it be better for your credit report if you just closed those zero balance credit cards, or keep them opened? I know their is a point where what you "could" spend can hurt you and I just want to make sure if we decide to by another house or something down the road that our credit is the way they want to see it. Does any of that make since?

[melglnh2o]

I am not an official credit card counseling person but the longer your cards are open and are in good standing then the better it is for your credit rating. Also, it is better to have less than 50% balance on any one card. For example, if you have a $10K limit on one card and a $20k limit on the other and want to borrow $15K, it is better to put $5 on the first card and $10K on the second card instead of all of it on the second card with the bigger limit.

[Kristy!]

Do not close the credit card accounts. Mel is right. Long term, good-standing relationships are desireable.

[Jessalyn]

You don't want to close accounts that have been open for a long time...and it is better to have lots of available credit than a little....what is looked at is the ratio of how much you owe to how much you have available...so if you have 50K available in credit and you use 10K of that, you are only using 20% of your available credit...on the other hand, if you close some of your credit cards and then only have $15K available and you charge 10K, now you're using 67% of your available credit, which looks worse to the credit companies... also, the longer the accounts have been open the better they reflect on your credit score, so you don't want to close accounts that you've had for a long time... check out this link.. How Your FICO® Credit Score is Calculated - myFICO.com myfico.com has some great info and advice.

[TammyB]

So if I have 10 cards 8 of them having a zero balance and the other two with a small balance, it's best to keep them all open? I thought it could hurt you to have too much potential debt to income?

[melglnh2o]

I think ideally it is better to only have a few cards so if you have 10 cards, I don't think it would hurt to close a few of them. Just pick the newest ones with the lowest available credit limits.

[Jessalyn]

Yes..keep them all open, especially if you have a long credit history with them...had them for a long time. ...
from Myfico...

Amounts Owed Tips
Keep balances low on credit cards and other “revolving credit”.
High outstanding debt can affect a credit score.
Pay off debt rather than moving it around.
The most effective way to improve your credit score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
Don't close unused credit cards as a short-term strategy to raise your score.
Don't open a number of new credit cards that you don't need, just to increase your available credit.
This approach could backfire and actually lower your credit score.

[TammyB]

So what is considered a "long standing account"?

[Jessalyn]

Do you have recent accounts that you've just opened that you don't use? If you really want to close some cards, close the ones that you've opened most recently, but be aware of the available credit (on all cards) you will have after you close them.

I would definitely not close cards that you've had for more than 5 years...I haven't read that anywhere, it's just my opinion.

If you opened some cards for the intro 0% financing for a year and have paid them off recently, it probably wouldn't hurt you to close them...again, just keep your total avail credit in mind.

[TammyB]

Thanks Jess.. :-)

I think most if not all my cards have been open for awhile now. So when does too much credit effect your score? So say I have 50k in open credit but I make say 60k a year, wouldn't that be bad for your credit report?