Loaded Credit Scenario Question

[Anonymous]

This is a loaded question I guess.

I don't have a long credit history.  I have a few hits that occurred while in college (cell phone and cable). That was about 6 years ago.  I opened up a small card with a $300 limit in 04 and worked with that for a while however I didn't use it much. I then made a bad choice and purchased a motorcycle through HSBC Retail services and only paid the minimum for a few years. The account shows positive payment history but a close to maxed out balance. At the end of 07 and beginning of 08 I started aggressively trying to build my credit. I went with a new bank (Chase) and was offered a card with a $600 limit at the end of 06. I used the card and paid the balance keeping a small balance because I heard that was good to do. Since 06 I have purchased a house and car. My score gradually moved from a 616 in the beginning of 08 to a 690 currently. I was offered another card through Chase in Feb. with a $7k limit and was offered another Chase card a few months ago with a $8k limit. Now I have recently received an AMEX offer.  Everyone tells me AMEX is the type of card that is good to have. Utilmatley I am looking to get my score up to a 700+ without backsliding.

To sum up my scenario and action I was thinking about taking.....

Current Scenario

-HSBC bike account is at $10k. (almost maxed out)

-I currently have zero balances on the $300 card that was opened first in 04 and the $600 Chase card opened in 06. (I put $10 on them a month to show activity)

-I have a $600 balance on the $7k Chase card opened in Feb. and a $500 balance on the $8k Chase card opened a few months ago.

-$50 dollar balance on a Macy's card.

-Mortgage, Car Loan, and $20k in student loans.

Action I am thinking about taking

-Pay off the $10k on the bike in full.

-Close the two cards with limits of $300 and $600.

-I was told by Chase that I could pay the balance on either the 7 or 8k card and then combine the two Chase cards to have one card with a $15k limit.

-I then wanted to take the AMEX offer.

End goal

-Have the one Chase card with a $15k balance.

-Macys card

-Open a new AMEX account.

-Mortgage, Car loan and student loans.

I am looking to gain advice on if this would be a good course of action based on my current scenario and goal of wanting to obtain a 700+ score.  All advice is GREATLY appreciated.

Thanks!!

Message Edited by Independence on 12-03-2008 12:30 PM

[cobaltnv]

My first suggestion is to read Credit scoring 101 (if you have not already)

When you say you have a  balance on a card (Macy's for example) are you revolving that balance or PIF each month? Ideally you are paying in full. Your score would improve if you let less than half of your credit cards report a balance each month (so 2 of your 5 cards). Unless you have a good reason (like fees) I would not recommend closing your oldest account. Maybe you can combine on of your 600 cl chase with one of your other chase cards and keep the date from the $600 card. 

[cobaltnv]

Oh and by the way  Welcome to the forums Independence. You will find lots of useful information here.

[Anonymous]

Thank you for the response cobaltnv. I have not read Credit Scoring 101 but will pick it up. Thank you for the suggestions on how to manage the credit cards.

A few more questions....

-Will paying off the bike revolving line in full hurt me?

-Are different types of credit cards looked at as better than others? i.e. capital one vs. amex

-How long can I allow a card to sit with a 0 balance before it affects my score negatively?

-Will buying something and paying it right off before the due date count as using the card but allow for the balance to stay at 0?

[cobaltnv]

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@Anonymous wrote:

Thank you for the response cobaltnv. I have not read Credit Scoring 101 but will pick it up. Thank you for the suggestions on how to manage the credit cards.

A few more questions....

-Will paying off the bike revolving line in full hurt me?

Others are more knowledgeable about this than me. My understanding is that a mix of credit types helps (e.g. cc, mortgage, installment loans etc). So I would say that paying if off would probably not help your score, but also will not hurt it (much). I would do what makes the most financial sense for you situation.  

-Are different types of credit cards looked at as better than others? i.e. capital one vs. amex

I do not think the FICO formula cares what kind of card you have. Some have suggested that having a store card or gas card helps your mix of credit. 

-How long can I allow a card to sit with a 0 balance before it affects my score negatively?

If at least one of your cards is reporting a balance the rest do not matter. For the best scores, IMO, you want one credit card reporting a very small balance (< 1% of utilization)

-Will buying something and paying it right off before the due date count as using the card but allow for the balance to stay at 0?

Yes! This is how many of use keep cards active without having them reporting balances.  

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Message Edited by cobaltnv on 12-03-2008 01:34 PM

Message Edited by cobaltnv on 12-03-2008 01:35 PM