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Low limit & high rate card to help with utilization (but hurt average age)?

Math_Rocks
Established Contributor

Low limit & high rate card to help with utilization (but hurt average age)?

I have multiple questions as the year draws to a close so I'm going to try to split them up and get to the point with each:

 

Question #2 - With a 7 year old BK and high utilization and inquiries, we are in prime position for AA. I've tried to get on the offense by applying for a few more accounts to have options should anything negative occur. However, my pre-approved HSBC turns out to be a $1100 CL and 19.99% rate, hardly a good deal. No rewards, no promo rate but also no annual fee. The card has been mailed to me but I have not activated it. I've opened many accounts this year so my AAoA has taken a serious hit. Should I decline this card or keep it?

Filed Chapter 13 April 2012. Case successfully closed May 2017, about 1 month after 60th payment. FAKO scores on close date: TU 695 EQ 697. Received discharge July 11th - took forever! Real EX day of discharge 624.
Message 1 of 7
6 REPLIES 6
SCF
Valued Contributor

Re: Low limit & high rate card to help with utilization (but hurt average age)?

Someone else may come a long to correct me, but my understanding is that once you apply for and are approved for an account, it is open and will be reported to the CRAs.  The activation process is just a way for the creditor to cover themselves for fraud prevention and ensure that you recieve your card.  Some folks have even reported that they were able to use a card before activating it!

 

With no annual fee, and since it will probably show up on your report even if you close it before you use it, I think you should just keep it.  Don't carry a balance and hopefully as your new accounts age and your score goes up you'll be able to get that rate down and CL up.

Message 2 of 7
woopah
Established Contributor

Re: Low limit & high rate card to help with utilization (but hurt average age)?

I agree with SCF.  You already have the card, and whether you use it or not it's going to be on your credit report.  You've already taken the ding for the inquiry and the new account will report even if you close the card.  I know because I have a card I specifically stated I didn't want, they still opened it, and even though I closed it, since I said I didn't want it, it's still on my credit reports, and will be for another 9 years. 

 

Even though the limit is smaller than you were hoping, and the APR higher, it will help with your overall util.  Use the card at a minimum, every other month, for something small and then PIF so you don't have any interest charges.  HSBC is close happy, so using it every other month will prevent them from closing it for inactivity.  

Message Edited by woopah on 12-28-2008 04:47 AM
4/16/09: TU: 775, EQ: 805
2/11/09: TU: 773, EQ: 790, EX:790
11/16/08: TU: 773, EQ: 785, EX: 780
Goals for 2009: 0 Credit Card Debt & 0% Util (achieved 2/6/09), Mortgage! (achieved 11/2/09), getting closer to 800 scores (I crossed this earlier this year, but I'm sure I'm not there anymore!)
Message 3 of 7
marty56
Super Contributor

Re: Low limit & high rate card to help with utilization (but hurt average age)?


@Math_Rocks wrote:

 I've tried to get on the offense by applying for a few more accounts to have options should anything negative occur.


IMHO apping could be the cause of AA itself since some CCCs these days are watching your CR like a hawk.

1/25/2021: FICO 850 EQ 848 TU 847 EX
Message 4 of 7
Math_Rocks
Established Contributor

Re: Low limit & high rate card to help with utilization (but hurt average age)?


@marty56 wrote:

@Math_Rocks wrote:

 I've tried to get on the offense by applying for a few more accounts to have options should anything negative occur.


IMHO apping could be the cause of AA itself since some CCCs these days are watching your CR like a hawk.


 

 

 

Oh dear! So I may bring on what I'm trying terribly to avoid?

Filed Chapter 13 April 2012. Case successfully closed May 2017, about 1 month after 60th payment. FAKO scores on close date: TU 695 EQ 697. Received discharge July 11th - took forever! Real EX day of discharge 624.
Message 5 of 7
woopah
Established Contributor

Re: Low limit & high rate card to help with utilization (but hurt average age)?


@Math_Rocks wrote:

@marty56 wrote:

@Math_Rocks wrote:

 I've tried to get on the offense by applying for a few more accounts to have options should anything negative occur.


IMHO apping could be the cause of AA itself since some CCCs these days are watching your CR like a hawk.


 

 

 

Oh dear! So I may bring on what I'm trying terribly to avoid?


Yep.  There are threads on this board of people with the Hooters where Hooters is closing accounts because they don't like the app patter that their cardholders are going on after they got Hooters.

 

Anytime someone gets new credit they are seen as if they have an increased risk.  It may be the reason why your FICO score goes down when you get a new TL if you already have a sufficient mix of credit.  

4/16/09: TU: 775, EQ: 805
2/11/09: TU: 773, EQ: 790, EX:790
11/16/08: TU: 773, EQ: 785, EX: 780
Goals for 2009: 0 Credit Card Debt & 0% Util (achieved 2/6/09), Mortgage! (achieved 11/2/09), getting closer to 800 scores (I crossed this earlier this year, but I'm sure I'm not there anymore!)
Message 6 of 7
Math_Rocks
Established Contributor

Re: Low limit & high rate card to help with utilization (but hurt average age)?

Well, since its stuck there, I decided to at least try for better terms. I called and said that I didn't want to activate the card because of the high rate and low limit. The CSR offered a 12.99% fixed rate for 6 months and said that I could call back in then and ask for a lower rate again. She said that the account would be reviewed regularly for CLI's but that she couldn't change it.

 

All in all, my AAoA has dropped from about 6.5 to just under 3. Smiley Sad But our utilization is still managing to stay under 50% (barely, but under). We have high hopes that DH's income will improve soon and 2009 will see our credit balances dropping (but hopefully not our CL's!).

Filed Chapter 13 April 2012. Case successfully closed May 2017, about 1 month after 60th payment. FAKO scores on close date: TU 695 EQ 697. Received discharge July 11th - took forever! Real EX day of discharge 624.
Message 7 of 7
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