OP -I think closing your Credit One Card would be a good idea because it probably has high fees. You should be able to optimize your FICO scores with 3 cards. If it’s not costing you money to keep open then you might not want to close it. I do worry that if you apply for credit and they do a manual review of your report a Credit One Card might not look that great. However for credit scoring purpose and automatically generated (computer generated) credit decisions the Credit One Card is just like any other card and it won’t hurt you at all.
I would not close your Credit One card until you get it down to a zero balance and if you do close it I would make sure to keep checking to see if they add any trailing interest or fees after it is closed and make I’d make sure to pay those off as well. I wouldn’t close it with a balance because that would cause your utilization to go up because once closed it will have an available credit limit of zero and any balance would cause it to be maxed it out.
If you have the time to spend and you want to maximize your credit score for building purposes (to get a house or car [or just for a challenge
]) I would recommend the following:
For the best score you should have all of your cards report a zero balance and let one card report a balance of less than 7.99% (up to 30% is really fine unless you’re super OCD like me) of THAT CARD’S total available credit limit. You can still use the other cards just make sure to pay them to zero before their statements are generated (cut).
The one card that you let report a balance can then be paid down to zero as soon as it’s statement cuts with the balance. If you do this you will never have to pay interest on any of your cards.
If you carry a balance and pay interest on your cards then any rewards you earn are more than cancelled out by the interest you pay and you lose money. I make it my personal policy to never charge anything on a credit card that I don’t have enough money in the bank to pay off immediately. I use my cards with the mindset that I am making debit card purchases. I just funnel the money through my credit cards to earn rewards and bonuses and to show credit card use so I can build my credit. I realize that not everyone can afford to do this. But you should know that you don’t need to revolve balances and pay interest to get the best FICO scores and the banks can still make money from you anyway. The banks get swipe fees (a percentage of the purchase amount) each time you use one of their cards. This is how the bank pays you cash-back and points- they share part this swipe fee with you.
If you have a need to carry a balance for some reason you should get a card with the lowest interest rate possible and let that card be the one that you let report a balance.
For Navy that would be the Platinum rewards card. They actually currently have an offer where you could transfer all of your other credit card balances to a new Navy Platinum Card and get 0% financing for 12 months with no balance transfer fee.
If you did this you would have a year to pay off all of your current credit card debt with no interest. I’m guessing that Credit One is charging you pretty high interest. If you do decide to do this just keep in mind that you can’t use the new card for making any new purchases until you have paid the balance down to zero or Navy will start charging you interest on the day you make any new purchases.
Here is my advice:
If I had enough cash to do it I would pay everything down to zero except I would leave a $75 balance on the Navy card and then I would then wait until all the payments were reported to the credit bureaus. I would then apply for a new Navy rewards card. I think if you did this you would maximum your new starting credit limit with Navy and you would have a nice new rewards card to use and profit from.
If I couldn’t afford to pay off my entire existing balances (with the exception of the one card I want to report a small balance on) I would pay off as much of my other existing balances as I could, and wait for it to report to the bureaus and then apply for a Navy Platinum Card to use for balance transfers to pay off the rest my existing balances.
If you are impatient (like me) or if you don’t think you can make much of a dent in your current balances you could also just apply for the Navy Platinum Card now and see what limit you get. You may or may not get a smaller credit limit than you would have if you had waited for your credit reports to update.
As far as the effect of closing the Credit One Card:
It will not effect your FICO score until it falls off your report. Closed cards usually report for ten or so years after they are closed. Once they are no longer on your credit report they are no longer calculated into your average age of accounts and if it was your oldest card then your second oldest card would replace it as your oldest card in your FICO score calculation (which could cause a small point loss). But even if it is your oldest account when it falls off in about ten years it will probably have zero impact on your FICO scores (provided that it’s not MUCH older than your second oldest card).
I should mention that closing your Credit One card will effect your Vantage scores for the near term. (Vantage scores are the free scores available on sites such as Credit Karma, Credit Sesame etc...).
These scores don’t really matter because most lenders do not use them but I mention it so you won’t get worried if you notice this.
If you decide to pay only a portion of your current balances before you apply to Navy let us know how much money you plan to use to make the payments and we can help you figure the best way to use the money to get the biggest score bump prior to your new app. You get points from paying cards down under certain utilization thresholds and you will also get points for having most of your cards report a zero balance.
Hopefully you’re not sorry you asked now. Good luck!
I would not close your Credit One card until you get it down to a zero balance and if you do close it I would make sure to keep checking to see if they add any trailing interest or fees after it is closed and make I’d make sure to pay those off as well. I wouldn’t close it with a balance because that would cause your utilization to go up because once closed it will have an available credit limit of zero and any balance would cause it to be maxed it out.
If you have the time to spend and you want to maximize your credit score for building purposes (to get a house or car [or just for a challenge
]) I would recommend the following:For the best score you should have all of your cards report a zero balance and let one card report a balance of less than 7.99% (up to 30% is really fine unless you’re super OCD like me) of THAT CARD’S total available credit limit. You can still use the other cards just make sure to pay them to zero before their statements are generated (cut).
The one card that you let report a balance can then be paid down to zero as soon as it’s statement cuts with the balance. If you do this you will never have to pay interest on any of your cards.
If you carry a balance and pay interest on your cards then any rewards you earn are more than cancelled out by the interest you pay and you lose money. I make it my personal policy to never charge anything on a credit card that I don’t have enough money in the bank to pay off immediately. I use my cards with the mindset that I am making debit card purchases. I just funnel the money through my credit cards to earn rewards and bonuses and to show credit card use so I can build my credit. I realize that not everyone can afford to do this. But you should know that you don’t need to revolve balances and pay interest to get the best FICO scores and the banks can still make money from you anyway. The banks get swipe fees (a percentage of the purchase amount) each time you use one of their cards. This is how the bank pays you cash-back and points- they share part this swipe fee with you.
If you have a need to carry a balance for some reason you should get a card with the lowest interest rate possible and let that card be the one that you let report a balance.
For Navy that would be the Platinum rewards card. They actually currently have an offer where you could transfer all of your other credit card balances to a new Navy Platinum Card and get 0% financing for 12 months with no balance transfer fee.
If you did this you would have a year to pay off all of your current credit card debt with no interest. I’m guessing that Credit One is charging you pretty high interest. If you do decide to do this just keep in mind that you can’t use the new card for making any new purchases until you have paid the balance down to zero or Navy will start charging you interest on the day you make any new purchases.
Here is my advice:
If I had enough cash to do it I would pay everything down to zero except I would leave a $75 balance on the Navy card and then I would then wait until all the payments were reported to the credit bureaus. I would then apply for a new Navy rewards card. I think if you did this you would maximum your new starting credit limit with Navy and you would have a nice new rewards card to use and profit from.
If I couldn’t afford to pay off my entire existing balances (with the exception of the one card I want to report a small balance on) I would pay off as much of my other existing balances as I could, and wait for it to report to the bureaus and then apply for a Navy Platinum Card to use for balance transfers to pay off the rest my existing balances.
If you are impatient (like me) or if you don’t think you can make much of a dent in your current balances you could also just apply for the Navy Platinum Card now and see what limit you get. You may or may not get a smaller credit limit than you would have if you had waited for your credit reports to update.
As far as the effect of closing the Credit One Card:
It will not effect your FICO score until it falls off your report. Closed cards usually report for ten or so years after they are closed. Once they are no longer on your credit report they are no longer calculated into your average age of accounts and if it was your oldest card then your second oldest card would replace it as your oldest card in your FICO score calculation (which could cause a small point loss). But even if it is your oldest account when it falls off in about ten years it will probably have zero impact on your FICO scores (provided that it’s not MUCH older than your second oldest card).
I should mention that closing your Credit One card will effect your Vantage scores for the near term. (Vantage scores are the free scores available on sites such as Credit Karma, Credit Sesame etc...).
These scores don’t really matter because most lenders do not use them but I mention it so you won’t get worried if you notice this.
If you decide to pay only a portion of your current balances before you apply to Navy let us know how much money you plan to use to make the payments and we can help you figure the best way to use the money to get the biggest score bump prior to your new app. You get points from paying cards down under certain utilization thresholds and you will also get points for having most of your cards report a zero balance.
Hopefully you’re not sorry you asked now. Good luck!
@Hex wrote:
If you have the time to spend and you want to maximize your credit score for building purposes (to get a house or car [or just for a challenge
For the best score you should have all of your cards report a zero balance and let one card report a balance of less than 7.99% (up to 30% is really fine unless you’re super OCD like me) of THAT CARD’S total available credit limit. You can still use the other cards just make sure to pay them to zero before their statements are generated (cut).
The one card that you let report a balance can then be paid down to zero as soon as it’s statement cuts with the balance. If you do this you will never have to pay interest on any of your cards.
I actually don't think this is the best way to "build" a credit score. AZEO is good for right before you are applying for something. It should be used for a specific situation. It is NOT the best thing to do long term, because the FICO algorithm will ding your score if you're not showing managed and responsible use of multiple cards. You get a score bump for showing "recent use of credit cards." If you're consistently let all of the same cards report with a zero balance, and only using one card, I believe you lose out on that score bump. Additionally, as others have pointed out, lenders like to see people using multiple cards. If your suggestion was for him to do AZEO for a specific application, then I agree. If it was to ALWAYS employ this strategy to "build" his credit score over time, then I disagree.