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New Member
raistlinux
Posts: 6
Registered: ‎05-23-2011
0

Close old credit card and/or increase limit on new one?

Hi all - I just recently joined a new credit union and they offer amazing rates, better than my previous CU... partly because over the last 5yrs I've done well with the old one and built up my score (thanks to them really) to have access to better rates. Still the new one is better. Since the new one is so great, I decided to refinance my two car loans and open a new credit card for the purpose of transferring my old credit card balance to them... saving good money in the process. Here's my question... At this moment, I now have two cards open with 5,000 limit each, so I've inadvertently increased my available revolving credit. Truthfully I intended to close my old credit card because I no longer need it. But all the advice I'm reading says NOT to close the old card because of my revolving credit ratio which I should try to keep low (~30%). If I close my old credit card account, my ratio will increase to 50% and possibly affect my score.... I'll be back to where I started (same limit as before) and without the good, long payment history from the old CU. HOWEVER, wouldn't it be the same if I close the old credit card and simply ask for a credit limit increase on the new card?? This would keep my new revolving credit limit the same as today and still have the lower ratio. Although the history would be gone from the old card. As a side note, after a few weeks of moving all these loans around, I half expected my fico score to drop a bit because of the opening of accounts on my credit report, but instead I just got an alert from Experian saying it jumped 3pts. I'm now happily over 700 and would like to continue improving my score. Any feedback and advice on my situation would be much appreciated! Thanks in advance! Rafa.
Established Contributor
UFGuy2006
Posts: 743
Registered: ‎08-02-2008
0

Re: Close old credit card and/or increase limit on new one?


raistlinux wrote:
Hi all - I just recently joined a new credit union and they offer amazing rates, better than my previous CU... partly because over the last 5yrs I've done well with the old one and built up my score (thanks to them really) to have access to better rates. Still the new one is better. Since the new one is so great, I decided to refinance my two car loans and open a new credit card for the purpose of transferring my old credit card balance to them... saving good money in the process. Here's my question... At this moment, I now have two cards open with 5,000 limit each, so I've inadvertently increased my available revolving credit. Truthfully I intended to close my old credit card because I no longer need it. But all the advice I'm reading says NOT to close the old card because of my revolving credit ratio which I should try to keep low (~30%). If I close my old credit card account, my ratio will increase to 50% and possibly affect my score.... I'll be back to where I started (same limit as before) and without the good, long payment history from the old CU. HOWEVER, wouldn't it be the same if I close the old credit card and simply ask for a credit limit increase on the new card?? This would keep my new revolving credit limit the same as today and still have the lower ratio. Although the history would be gone from the old card. As a side note, after a few weeks of moving all these loans around, I half expected my fico score to drop a bit because of the opening of accounts on my credit report, but instead I just got an alert from Experian saying it jumped 3pts. I'm now happily over 700 and would like to continue improving my score. Any feedback and advice on my situation would be much appreciated! Thanks in advance! Rafa.

I would not close the card with the good payment history. Why not just leave it open? If there is no AF and its a decent card, just sock drawer it.

FICO: EX: 743 (10/14); TU: 758 (9/14); EQ 721 (9/14)

In My Wallet: Amex X 5 | Barclays X 3 | BOA X 1 | CapOne X 3 | Chase X 3 | Citi X 7 | DCU X 1 | Discover X 1 | Fidelity X 1 | Fifth Third X 1 | Macys X 1 | PenFed X 1 | PSECU X 1 | Sams Club MC X 1 | Target RedCard X 1 | USAA X 2 | US Bank X 1 | Walmart X 1 | Wells Fargo X 1 = 36 Cards

Holding off apps until the end of the year! Wish me luck!
Frequent Contributor
stanggt03
Posts: 437
Registered: ‎05-21-2011
0

Re: Close old credit card and/or increase limit on new one?

Nope I wouldn't close it. You've had it a long time. The length of time, plus the additional available credit, will really help your score. Sock drawer it, as stated above.

Starting Score: 596 EQ 5-22-11 / 554 TU 5-23-11
Current Score: 615 EQ 08-15-11 / 631 TU 09-27-11
Goal Score: 700+


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Valued Contributor
mauve
Posts: 2,487
Registered: ‎02-18-2010
0

Re: Close old credit card and/or increase limit on new one?

1) You won't lose AAoA over closing that account - once closed, it should contribute to your AAoA for 10 years from date of closure. 

2) utilization is 30% of your score.  For ideal utilization, you want a balance reporting on LESS THAN HALF of your open revolving credit lines.  Well, even better is to have all but one credit line reporting 0% utilization and that one should report less than 9% utilization.  You'd need a minimum of 3 open revolving credit lines to maximize this part of your score.

 

So, don't worry about the AAoA, but I'd definitely opt for getting to 3 revolving lines and not staying at 1, which is what it sounds like you're debating doing.


Starting Score: EQ 583 TU04 619 EX 592 (lender pull) 2010
Previous High Score: EQ 700 TU04 712 EX 726
Current Score: EQ 740 TU(Discover) 750 EX(AMEX) 747
Goal Score: 740+ all around


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Valued Contributor
AndySoCal
Posts: 1,947
Registered: ‎04-07-2009
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Re: Close old credit card and/or increase limit on new one?

I would not close the account. I would use the card two to three times a year or more. FICO likes a long credit history. My oldest card 20+ years and will be used for many more. I have another card which is closed a retailer that cloed that has 28 years of histroy.

Equifax My FICO score 815 5/28/2012, 818 on 7/28/2014 . Average of Accounts 12 years and no Installment accounts. MyFICO TU 810 6/26/2012 809 4/21/2013 MyFICO XPN -805. 2/26/2014 Discover TU FICO 813 App free since 9/2011
New Member
raistlinux
Posts: 6
Registered: ‎05-23-2011
0

Re: Close old credit card and/or increase limit on new one?

Hi mauve - wow, super helpful information... This is exactly the kind of information I need!

So I should have three lines? That's surprising, but it makes sense if the bureaus want to see that you have credit available to you... like having options. So I should shop around for another card? Or a retail card?

And just to clarify one thing, the overall balance should be less than 50% across all lines of credit? Or less than 50% per line?

Where do you get these guidelines, rules, dos, don'ts (like utilization details)?? I used to have a score in the high 500s and now 5yrs later I've just made it past 700 so I've been working hard to get it together... I need it to get better rates and buy a home in the next 5yrs. If you have any references that I can read, I would appreciate it greatly.

Thanks!!

Rafa.
New Member
raistlinux
Posts: 6
Registered: ‎05-23-2011
0

Re: Close old credit card and/or increase limit on new one?

Forgot to mention that I've decided to keep the other line open and use is sparingly as suggested. And I suppose I will investigate getting another.

Luckily I didn't get a chance to close my old card, so I'm very appreciative of the help and will continue to use the forums here for future help.

Cheers!

Rafa.
Moderator Emeritus
beamMEup
Posts: 4,470
Registered: ‎12-31-2008
0

Re: Close old credit card and/or increase limit on new one?

Good.  I"m glad you kept it open.

 

One of our best threads is fused's Closing Credit Cards which is helpful in understanding the impact of closing cards.

 

You'll do great FICO wise to let one card report a zero balance and let the other one report (as little as possible- ideally less than 9%.)

 

IMO, Opening a third card right now will probably cost you FICO points.  YMMV and you'll be fine with either two or three cards.  You'll want to watch your AAofA, though.  IMO, let your new account age for 12 months and then consider opening a third.  But you'd be fine for a very long time (forever) with just the two - if that's the way you like it.  And you'll do best with the reporting strategy of one reporting a zero balance and the second reporting below 9% (when you get there). 

 

Congrats on that new card!  And it never hurts to ask for a CLI - which would help your utilization while you're paying down the balance - and your FICO score.

Just puttin' syrup on something, don't make it pancakes.
Valued Contributor
mauve
Posts: 2,487
Registered: ‎02-18-2010
0

Re: Close old credit card and/or increase limit on new one?

It can hurt to ask for a CLI - Chase, for instance, told me when I asked the question that if they decide to up your CL during an account review, it's a soft pull and that if you request a CLI they do a hard pull.  Also, if OP is in the 700's, why not just get a 3rd card now instead of waiting another year?  Doing it now means that in a year that inquiry will be off and the 3rd card will be a year old instead of 0. 


beamMEup wrote:

Good.  I"m glad you kept it open.

 

One of our best threads is fused's Closing Credit Cards which is helpful in understanding the impact of closing cards.

 

You'll do great FICO wise to let one card report a zero balance and let the other one report (as little as possible- ideally less than 9%.)

 

IMO, Opening a third card right now will probably cost you FICO points.  YMMV and you'll be fine with either two or three cards.  You'll want to watch your AAofA, though.  IMO, let your new account age for 12 months and then consider opening a third.  But you'd be fine for a very long time (forever) with just the two - if that's the way you like it.  And you'll do best with the reporting strategy of one reporting a zero balance and the second reporting below 9% (when you get there). 

 

Congrats on that new card!  And it never hurts to ask for a CLI - which would help your utilization while you're paying down the balance - and your FICO score.




Starting Score: EQ 583 TU04 619 EX 592 (lender pull) 2010
Previous High Score: EQ 700 TU04 712 EX 726
Current Score: EQ 740 TU(Discover) 750 EX(AMEX) 747
Goal Score: 740+ all around


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Moderator Emeritus
MarineVietVet
Posts: 14,576
Registered: ‎07-14-2009
0

Re: Close old credit card and/or increase limit on new one?

[ Edited ]

raistlinux wrote:
Hi mauve - wow, super helpful information... This is exactly the kind of information I need!

So I should have three lines? That's surprising, but it makes sense if the bureaus want to see that you have credit available to you... like having options. So I should shop around for another card? Or a retail card?

And just to clarify one thing, the overall balance should be less than 50% across all lines of credit? Or less than 50% per line?

Where do you get these guidelines, rules, dos, don'ts (like utilization details)?? I used to have a score in the high 500s and now 5yrs later I've just made it past 700 so I've been working hard to get it together... I need it to get better rates and buy a home in the next 5yrs. If you have any references that I can read, I would appreciate it greatly.

Thanks!!

Rafa.

Hi there and welcome.

 

Here is a thread talking about What's In Your Score? It breaks down how FICO scores different aspects of your credit profile.

 

As far as how to use your cards for maximum benefit of utilization everyone's situation is different and there is no one size fits all approach to this but what seems to work well for most people is to have only one of their cards report a small (<9% of it's credit limit) balance each month and then pay in full before the due date. You can use it as much as you want during the month but what's important is the reported balance because for most cards whatever is reported on the monthly statement is what is used to calculate utilization for the month.

 

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

You might have to play around with the percentages for a few months to see what works best for you. Some people say that 1-3% utilization helps the most. For others it might be 5-9%. As I said it's not one size fits all.

 

 

 

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".




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