Specific ? re:closing line of credit -> FICO score

[laudesumma]

Hi -

I have three revolving credit accounts - two straight up credit card accounts that I have had for about 15 years each that have a combined total credit limit of $40,000.  I have never had a late payment on either and have picked up a balance of a thousand or two on each every single month since they were opened.  Their current balance is $0.

I have another credit line that I had to open in June of 2013... basically, I had to purchase a new HVAC and compressor unit for my home when my last ones died.  In order to get this purchase (at the time my credit cards were both maxed), I got a home improvement-specific line of credit from GE Capital (not a standard credit card).  The credit limit on this line is $6,000.  Again, it was opened about a year ago.  I have made payments on time and as of today was able to pay off the entire remaining balance.

My other credit history includes a mortgage that I made payments on time for from 5/2008 to 5/2014 (just sold the property and am now renting instead of owning)... my history also includes a variety of federal student loans (medical school, about $300,000, all federal loans with low rates that supposedly would not hurt credit much if at all) along with one private physician loan, none of which have ever had a late payment.

I have no other lines of credit; my cars have been paid for in cash and I have never had an auto loan or other type of revolving or installment loan.

The balance in my bank account is quite low for the time being (sub-$5000) and will be for the next 6 months before building up.

I plan to keep the 15-year-old credit lines open for obvious reasons (high credit limit, low utilization of credit, high longevity/age of accounts, given I am only 32 years old) since they undoubtedly boost my credit score.

My question is this... would it more likely be beneficial to my credit score and creditworthiness to leave the 1 year old GE CAPITAL home improvement-specific line of credit opened and maintain it at a $0 balance (never make purchases on it), or to close that account entirely?

I appreciate any help you can give.

- MR

[user5387]

A general rule of thumb is that you need multiple revolving accounts to optimize your scoring.

A typical figure that is mentioned is at least three accounts.

So this would argue for leaving the LOC open.

One sanity check would be to ensure that the LOC does show up on your reports, and if so, that it shows up as revolving rather than installment or something else.

Installment loans are also beneficial, and it looks you have this area covered with your mortgage and SLs.

[laudesumma]

So... 3 is the magic number for revolving accts?  I will probably aim to open a fourth standard credit card account and close this home improvement one in one or two years, since it is not one that has a credit line that can be increased and since the interest rate is 26.99% (as opposed to my credit cards, which are 9.24 and 13.24%, both variable and stable for years and years).  Does this sound like the best strategy to maximize my score increase moving forward along with my ability to get loans at the best rates?

FWIW, the installment loans all have rates in the 4-6% range and I am only making minimum payments on them... should not hurt, and I can make that much back through careful investment rather than paying them down.

[user5387]

If you really have no use for the LOC, you might wish to replace it with a couple of new CCs.

It's important to maintain multiple open revolving accounts, because these demonstrate your ability to handle unsecured credit.

If you are interested in "financing" angles rather than just conventional CCs, a couple of possibilities would be (1) a regular LOC instead of a CC, or (2) a CC from a CU, that is characterized by high CLs, low APRs, minimal AA risk, no fees for balance transfers and cash advances, and so on.  Some common examples of this sort of CC are the DCU, Penfed, PSECU, and SDFCU Visas.

Re the installment loans -- they typically benefit you for scoring purposes, but you might want to check the DTI angle.  DTI is not included in scoring, but is integral to the loan approval process.