topic Re: How much is too much? in General Credit Topics

How much is too much?

Anonymous — Wed, 15 Feb 2017 04:12:31 GMT

I'm a 25 year old young man. I have a Capital One card with a $6k credit limit, a bank of america with $1500 limit, and a Walmart with $6k. I am about $1300 in debt atm. Should I look for another card? Or am I good?

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 04:33:51 GMT

You'll need to tell us more about your goals. If you were planning to buy a house in the next 8 months, for example, the answer would be no.

Three cards is sufficent to reach ultra-high scores, e.g. the 830s. (You don't need more cards, in other words, though you may need more total accounts or an open loan.) That said, there are still reasons to slowly look around for a few more cards, eventually.

Do you have an open installment loan? If so, what is it? If not, we can suggest a way for you to improve your score a lot at almost no cost to your wallet.

Finally, you mention that you are $1300 in debt. I am guessing that this means CC debt and that it is not debt you could painlessly pay off tomorrow. If so, a goal you should move to the top of your list is paying all that debt off -- unless it is on a 0% card.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 05:05:34 GMT

That IS CC debt. I could pay it down to next to nothing in a couple months time. Just a short 6 months ago I had $4k of CC debt... whoops! I have college loans out, I am NOT looking for any big purchases (house, car, etc)

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 05:38:16 GMT

2 suggestions based on what you've told us so far:

1. Get that debt down to under 9% of your total available credit ASAP. You can accomplish this strictly by paying it down, or by a combination of paying it down and adding to your total available credit.

2. Take CGID up on his "Ask me how" offer...He's our resident guru on how to turn $500 into a 20-30 point FICO jump, and still keep most of the $500

(If you're too shy to ask, just look here)

Good Luck!

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 05:59:26 GMT

Sounds like you have open student loans, but they are your only installment loans. (No auto loans, personal loans, etc.) Is that right?

If so, you'd be a huge help to the community here if you'd consider implementing the SS loan technique that TygerH mentions. It's possible that SL debt is scored apart from other kinds of installment debt, in which case that technique might help somebody like you. Possible -- we don't know for sure. It would be real nice if we did know, and you could help us with that.

In the meantime, you'll certainly help your score out if you'd pay off your CC debt, and then continue to use one card but pay it in just each month. That would also help your wallet out, since you are likely paying a lot of interest on that debt.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 12:55:25 GMT

About the only time I ever recommend someone opening up another CC when they have CC debt is if they are paying interest on that debt and have an opportunity to eliminate that interest through a BT CC offer.

This is not the case for the OP, so my suggestion would be to not open up another account.

You stated that you could pay off that debt in a few months time. If that's the case, definitely do that. Then if you still desire another CC, you'd be applying with zero debt which is a much more favorable "look" for whoever you are applying with which could result in an approval under better terms (APR, starting limit, etc).

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 15:32:39 GMT

Thanks guys! I'm definitely going to try that loan 'trick'. What have I got to lose? Also, another question for you guys... How long can an account stay at 0 until they close it for no use? It is for this reason that I try to put a minimal recurring payment on each card. I had one of my accounts closed (a store card) but I don't remember the details.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 15:37:04 GMT

CGID,

On your SS loan 'trick' does it matter how much the loan is for? Like, would $1000 be better than $500?

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 16:48:53 GMT

@Anonymous wrote:
CGID,
On your SS loan 'trick' does it matter how much the loan is for? Like, would $1000 be better than $500?

Nope. $500 is fine. No scoring advantage to doing more.

And for the record, I am just the chronicler of something that smarter and more creative people figured out a year or two before (notably Revelate). So the SSL trick is definitely not mine, in the sense that I was the guy who discovered it. I put that guidance together just to help folks like you -- put all the received knowledge in one place, with some step by step instructions.

I am so grateful you are doing this. Would you mind having a conversation about it via PM (private message)? You and I can make sure your profile is set up in a way that will give us a definite answer as to whether it helped you or not. To start with, we'll want to get your CC balances paid down first.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 17:02:04 GMT

@Anonymous wrote:
Thanks guys! I'm definitely going to try that loan 'trick'. What have I got to lose? Also, another question for you guys... How long can an account stay at 0 until they close it for no use? It is for this reason that I try to put a minimal recurring payment on each card. I had one of my accounts closed (a store card) but I don't remember the details.

An account can report $0 for many years with no risk of being closed. A key contributor here on the forums is SouthJamaica, and almost all of his many cards report $0 every month. I think he's been doing that for a long time.

There's a difference, however, between a card reporting $0 and the owner not using it. I could use a card quite a lot, then pay it down to $0 a few days before the statement closed, and the issuer would report $0 to the CRA.

The rule for protecting yourself from an issuer closing a card due to inactivity is to use the card periodically. Once every six months appears to be fine and it can be for one small purchase. I collected a lot of case studies at one point for closures due to inactivity and in every case one of two things happened:

(1) The card had never been used even once

(2) The card had not been used for at least 7 months.

Even the 7-month cases were extremely rare and appeared to be confined to Wells Fargo. And if a card is a store card, people report having these stay open sometimes for three years or more with no activity.

If you can remember any details about the closure of your store card, I'd love to hear them.

Re: How much is too much?

SouthJamaica — Wed, 15 Feb 2017 17:28:09 GMT

@Anonymous wrote:
@Anonymous wrote:
Thanks guys! I'm definitely going to try that loan 'trick'. What have I got to lose? Also, another question for you guys... How long can an account stay at 0 until they close it for no use? It is for this reason that I try to put a minimal recurring payment on each card. I had one of my accounts closed (a store card) but I don't remember the details.
An account can report $0 for many years with no risk of being closed. A key contributor here on the forums is SouthJamaica, and almost all of his many cards report $0 every month. I think he's been doing that for a long time.

True

There's a difference, however, between a card reporting $0 and the owner not using it. I could use a card quite a lot, then pay it down to $0 a few days before the statement closed, and the issuer would report $0 to the CRA.

The rule for protecting yourself from an issuer closing a card due to inactivity is to use the card periodically. Once every six months appears to be fine and it can be for one small purchase. I collected a lot of case studies at one point for closures due to inactivity and in every case one of two things happened:

(1) The card had never been used even once
(2) The card had not been used for at least 7 months.

Even the 7-month cases were extremely rare and appeared to be confined to Wells Fargo. And if a card is a store card, people report having these stay open sometimes for three years or more with no activity.

If you can remember any details about the closure of your store card, I'd love to hear them.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 18:08:47 GMT

Well, to be honest I'm not so sure now if the 'trick' CGID proposed is a good fit for me or not... see, I'm in the market for an electronic wheelchair. if the insurance won't come through, I'll have to take out an installment loan on it, so it seems for now I will just pay off my CCs and wait and see

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 18:22:09 GMT

Yup, you have got practical concerns, not the right time to be playing around to serve theoretical ends.

My advice is this:

Pay your CC's down. You want all cards reporting $0 except one. The remaining card should report something small, like $10. Then use the $1 trial at Credit Check Total to see what your three scores are.

If you think you could pay off the wheelchair in a short period of time (< 12 months) then obtaining a fourth card with a 0% introductory rate might be far better than an installment loan.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 18:32:32 GMT

How much does average age of accounts, though, factor in? Won't I be setting myself back a little bit by opening a 4th card? Shouldn't I just take my lowest card and request a credit increase instead?

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 19:26:08 GMT

You never know if you'll get a CLI.

As far as AAoA goes, it's very simple to figure. You have 3 current accounts on your credit reports (open AND closed) correct? Add up the age of these accounts... for example if they are 2, 5 and 6 years old you have a total of 13 years there, divided by the 3 accounts yields an AAoA of 4.33 years. Decimals are always dropped off and rounded down to the whole number, so AAoA is 4 years. If you add another account instead of dividing 13 by 3 you are dividing it by 4, meaning your AAoA becomes 3.25 years or 3 years. Basically in this example, for scoring purposes your AAoA drops from 4 years to 3 years. Whether or not this would result in a scoring change is debatable. It would take 9 months to achieve a 4 year AAoA after opening this new account.

If you have MORE than 3 accounts, simply use the example I gave above by adding up their ages and dividing by the total number of accounts. The more than you have, the less a new account will impact AAoA.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 19:57:28 GMT

I have MANY closed accounts. Let's see, a Home Depot, a Walmart, a Belden's jewelers, an old Capital One, and a paid off car loan. Open, I have 3 + my student loans (which I need to start paying down while im still IN school)

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 21:18:04 GMT

OK, so list out those accounts along with their ages so that your AAoA can be determined. There's a chance that the addition of a new account may not change your AAoA (by a whole number) and of it did no doubt it would only be 1 year which may not be significant depending on your current AAoA.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 21:50:49 GMT

Well, tbh, I don't really need any help in the AAoA area, as that is just simple math i only asked because I wasn't sure how heavily my AAoA was weighed.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 22:11:01 GMT

It depends on what your AAoA is. The higher it gets, the less a 1 year change [which could result from a new account or accounts] impacts it.

What I mean is that an AAoA dropping from 2 years to 1 year is more significant than a 6 dropping to 5, which is more significant than 11 dropping to 10, etc.

Re: How much is too much?

Anonymous — Wed, 15 Feb 2017 22:33:14 GMT

Well, currently my AAoA is 4 and change... sit for a little bit?