Re: Credit Scoring 101 - START HERE!
07-11-2007 04:58 PM
This from the Score Basics link gets at my question:
1. Close unused credit cards as a short-term strategy to raise your score. NEVER close an open account unless it is costing you money!
According to a Fair Issac Corp rep, and my step-daughter' s account of something she heard Suze O say, the above means that, all other factors being equal...
- One credit card with a limit of $5,000 with a $500 balance, spotless payment history over 18 months.
- A credit report showing five other PAID OFF AND CLOSED accounts, all with a spotless payment hisotry over 36-48 months.
Person B exactly the same, except the five paid off accounts remain open and have a credit limit totaling $7,500 - that is Person B has access to potential debt of $7,500.
Person A will have a lower Credit Score! Given that Person A has a substantial and spotless credit history and no ready access to additional debt I would think Person A would have a higher socre, but apparently I am wrong.
I'm no rocket surgeon, but can someone explain this counter-intuitive reasoning to me?