Credit Cards

[Trev]

Ok,

So in January of 07 I started managing my credit that was absolutely horrible. I had a 500-510 score in all 3 reporting agencies. I've had a bankruptcy in Jan 2000, and just poor credit work due to real issues - divorce, job changes and I even fell for one of those credit management companies that really just ruin your credit by telling you to " Immediately stop paying your cards ". The latter really pissed me off btw, considering I wanted to pay my bills... anyhow.. on to real things

Today, I have a 610 - 624 score, and I must say it is from following guidelines all of you folks have set down here. Over the last couple of weeks we dipped 18pts (2x -9 adjustments) probably from inquiries. I expect it to bounce back with an increase of $2500 to my credit line that has not been accounted for yet.

So, I come to my credit card problem. I have 4 cards(visa,mc,visa,target) with annual charges that I needed to get started fixing my credit. Each card had a limit of 250-350, and all but one have increased over the last couple of months to a $400 - $500 limit.

I applied, and received a card from Washington Mutual with a credit line of $2500, and no fees.

My thought was to pay off and cancel the other cards, except perhaps the Target card that has no associated fees. This would still increase my AVAILABLE credit line by about $1000 and of course make it a hell of a lot easier to ensure payments are made on time and.. easier to manage.

The cards in question have only been open for 6 months or less.

Will that route hurt my credit?

-- Thanks for any tips or thoughts...

[thrasher865]

Which cards (if any) are you carrying balances on?  If you pay off all the cards, then no, closing them will not immediately affect your credit.  And since they're less than 6 months old, they really won't every affect your credit if you can find some better cards to replace them.  I might say try to get approved for one or two more higher CL cards before you go closing your fee riddled cards, though.

[Trev]

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thrasher865 wrote:

Which cards (if any) are you carrying balances on? If you pay off all the cards, then no, closing them will not immediately affect your credit. And since they're less than 6 months old, they really won't every affect your credit if you can find some better cards to replace them. I might say try to get approved for one or two more higher CL cards before you go closing your fee riddled cards, though.

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The 3 cred cards I was planning on canceling all have small balances on them that I was going to pay off first, then cancel, or do it all at once.

Getting more cards might hurt my credit though, my inquiry count is high... probably too high for the last year.. I don't recall it off hand( I could look ) but it was a concern of mine based on the readings in these forums, and denial letters I have recieved stating it as a reason for denial.

Thanks for the feedback.

[smallfry]

You gotta be careful not to have too many accounts reporting balances. If you have already paid the fees associated with the low limit cards I would wait to see if they will waive those fees. The number of accounts will help you manage your accounts reporting a balance each month and since you are not going to apply anytime soon then there is no harm in keeping them open a while longer. Pay them off. Congrats on a nice starting limit with Wamu.

[thrasher865]

If you have been denied for lots of inquiries then theres no sense in adding more inquiries that will likely be denied for the same reason.  Though since you've hit your CRs with those inquiries, you could also argue that now is the best time to go app happy so that all your inquiries will fall off close to the same time and you will have some accounts that are aging.

If you have a LOT of inquiries I'd probably pay off and close the few cards with the worst fees, but keep your new card with two or so of the old ones.  One card isn't going to build your credit as well as three.

edit: re-read your post.  I would definitely leave the target card open, then pick one more card that you can easily handle the fees on and leave it open.  Pay off the balance on all the cards but leave a balance on one.  Keep PIF those other two for a while and you'll be getting more acceptance letters from lenders like wamu once those inquiries start to drop.

Message Edited by thrasher865 on 06-04-2008 01:31 PM

[TheNewWorldMan]

Bear in mind inquiries have a short half-life. They decay in impact after a few months, and cease counting after a year. The moral of that story is, if it serves your long-term credit interests to rack up a few inquiries, do so (unless you're planning on going for a mortgage in the next year).

If a new card is dinging you for hefty fees and you have the credit score to get a better card, by all means do so and then close out that high-fee card.

If it's an older card that's one of your oldest accounts, I would tread more carefully and try and get the company to lower fees or move you to a better card. Some of the "starter card" companies simply don't offer that option--their business model is to serve the low-credit clientele.

[thrasher865]

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TheNewWorldMan wrote:

If it's an older card that's one of your oldest accounts, I would tread more carefully and try and get the company to lower fees or move you to a better card. Some of the "starter card" companies simply don't offer that option--their business model is to serve the low-credit clientele.

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Because of the short history, I would say close them.  They will factor into the average age for many years, and by the time they drop off, he will have his new cards only a year or so more recent, so the drop off of these cards won't affect the age of his accounts.

Really I think you should let the inquiries age a few months and then start applying for some better cards.  And I still think you should keep the target and at least one other one open for now.  Until you start getting those higher CL cards, then close everything but wamu and target and the new guys.  But thats just my opinion, GL finding someone that knows for a fact what your best move is

[smallfry]

While the inquiries cease to count in scoring after 1 year and they lose their punch after 6 months don't kid yourself into thinking the companies you apply to don't take them into account. I wouldn't go app crazy just yet. Your approval from Wamu might not be indicative of prime credit card approvals. They can be very strange. Tread lightly.

[haulingthescoreup]

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smallfry wrote:
While the inquiries cease to count in scoring after 1 year and they lose their punch after 6 months don't kid yourself into thinking the companies you apply to don't take them into account. I wouldn't go app crazy just yet. Your approval from Wamu might not be indicative of prime credit card approvals. They can be very strange. Tread lightly.

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Inqs DON'T lose their punch at 6 months. They carry full ding for 12 months and then none at all. This comes directly from Barry (myFICO admin.) What does fade is the newness penalty on the accounts that you get from the inq.

OP, I'm confused. How does closing your fee cards increase your available credit? I'm not against closing fee cards; but I'm not following your logic.

In general, before closing a card, make sure these things have happened first:
- pay them off, and have a statement or a screen print that shows that $0 balance.
- Get a new, better card, or a CLI on an existing good card, for at least as much on the CL on the card to be closed.
- Do a little projecting into the future to make sure that a paid-off loan, etc. won't be falling off at the same time. When old accounts fall off one at a time, there's usually no real damage, but when they fall off in clumps, especially if you don't have a lot of other TL's reporting at that time, your average age can get hurt.

Good timing is to close a card about 3-4 weeks before the fees hit again. Again, print out something showing that $0 balance, and then continue to check your online account for a least 2 months after you close it. And the scummier the bank/ credit card company, the longer you should keep checking to verify that they haven't tried to sneak something in. Also, request something in writing from the CCC verifying that the account is closed in good standing with a $0 balance, but these letters can be tough to get.

[athensguy]

It seems like a lot of companies will let you slip by with the same score and 6 month old inqs when they might not have at the same score and brand new inqs. I think both Citi and Penfed don't look very hard at inqs over 6 months old. Which makes sense, because any new accounts should show up within that timeframe.