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Help on Credit Card shopping and its effect on FICO scores.

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Anonymous
Not applicable

Help on Credit Card shopping and its effect on FICO scores.

I currently have 2 credit cards.  One was opened in 2000 and has a $10,000 limit.  The other was opened in 2003 with an $8000 limit.  I never use the $10,000 card as it has an obnoxiously high intereset rate, and a $59 annual fee.  The only reason I still keep the account open (and pay the fee) is because it's listed as my oldest line of credit, and I didn't want to cancel my oldest reporting line.  I keep small balances on the $8000 card (usually around $300-$400) so that I show some account activity. 

 

Lately, I've been thinking about getting a Credit card with a lower intereset rate with a rewards program.  I'm wondering what effect on my FICO there will be of opening another credit card and closing my oldest down.  Does the oldest credit card still report in good standing for another 10 years, even though it will have been closed? I'm really getting sick and tired of paying $59 a year just to keep my scores up.  My FICO's are in fairly good standing (all over 775).

 

Thanks for any thoughts and opinions.

Message 1 of 11
10 REPLIES 10
MarineVietVet
Moderator Emeritus

Re: Help on Credit Card shopping and its effect on FICO scores.

 


Hello and welcome to the forums.

@Anonymous wrote:

I currently have 2 credit cards.  One was opened in 2000 and has a $10,000 limit.  The other was opened in 2003 with an $8000 limit.  I never use the $10,000 card as it has an obnoxiously high intereset rate, and a $59 annual fee.  I understand about the AF. I might not be willing to keep that either but that decision has to be yours alone. As far as the interest rate I have several cards that are over 24% but I use them every month for small charges and always pay in full so there are never finance charges.

 

The only reason I still keep the account open (and pay the fee) is because it's listed as my oldest line of credit, and I didn't want to cancel my oldest reporting line.  I keep small balances on the $8000 card (usually around $300-$400) so that I show some account activity. Having a balance show and carrying a balance forward are two different things. It's allright to have a statement balance (1-9% of credit limit) but as I said always PIF before the due date. Carrying a balnce forward will result in finance charges and that is never necessary.

 

Lately, I've been thinking about getting a Credit card with a lower intereset rate with a rewards program.  I'm wondering what effect on my FICO there will be of opening another credit card and closing my oldest down.  Does the oldest credit card still report in good standing for another 10 years, even though it will have been closed? Getting another card will mean a new inquiry and  new credit on you file which might mean a small decrease in your score but in 6 months to a year (just my opinion) you will recover this.  A new account will lower your AAoA so that is something to consider.

 

Closing that oldest account means you will lose that $10,000 credit limit so your utilization could be affected in the future if you ever have a large amount charged to the other card. Since right now your utilization is at zero on the old card that is not a concern. If you do close this account it will continue to help your AAoA (Average Age of Accounts) and credit length history for up to 10 years after closing.

 

I'm really getting sick and tired of paying $59 a year just to keep my scores up.  My FICO's are in fairly good standing (all over 775).

 

Thanks for any thoughts and opinions.

 

 

Message 2 of 11
Anonymous
Not applicable

Re: Help on Credit Card shopping and its effect on FICO scores.

Thanks for the reply.  Let me ask this...will there be a substantial FICO hit (other than the hard inquiry) for opening a 3rd major revolving credit card?  I just dislike the fact that I don't have a credit card that can be working for me, when I can qualify for one.

 

Is there a large hit for having an over-abundance of credit? I guess it could also be possible to open a new line, and then ask the original card holder to reduce the amount of credit available as well...

 

I'm just looking for the safest solution in getting my cards working for me instead of against me.

Message 3 of 11
MarineVietVet
Moderator Emeritus

Re: Help on Credit Card shopping and its effect on FICO scores.

 


@Anonymous wrote:

Thanks for the reply.  Let me ask this...will there be a substantial FICO hit (other than the hard inquiry) for opening a 3rd major revolving credit card?  I just dislike the fact that I don't have a credit card that can be working for me, when I can qualify for one. Any ding will be minimal and temporary. Again this is just my opinion.

 

Is there a large hit for having an over-abundance of credit? I guess it could also be possible to open a new line, and then ask the original card holder to reduce the amount of credit available as well...  FICO doesn't care what your credit limits are. You are only scored on the percentage of usage of that credit.

 

I'm just looking for the safest solution in getting my cards working for me instead of against me.


 

Message 4 of 11
Anonymous
Not applicable

Re: Help on Credit Card shopping and its effect on FICO scores.

Ah, I thought I had read that your score could be lowered by having too much credit readily available.  If that is the case, I will leave my oldest standing open (regardless if I choose another card or not), and continue to pay the AF (even though that still gets under my skin).

 

Thanks for the quick replies.

Message 5 of 11
Anonymous
Not applicable

Re: Help on Credit Card shopping and its effect on FICO scores.

One other quick question.  If I apply for, and receive approval for another card, yet choose not to activate it due to me not liking the terms of the card, will anything other than the hard inquiry hit be reported to the credit agencies?

 

Message 6 of 11
MarineVietVet
Moderator Emeritus

Re: Help on Credit Card shopping and its effect on FICO scores.

 


@Anonymous wrote:

Ah, I thought I had read that your score could be lowered by having too much credit readily available.  If that is the case, I will leave my oldest standing open (regardless if I choose another card or not), and continue to pay the AF (even though that still gets under my skin).

 

Thanks for the quick replies.


A lender might decide you have too much available credit which is what happened to me 2 years ago. BoA closed a LOC with a CL of $26,5000 because they said I "had enough credit". 

 

Message 7 of 11
MarineVietVet
Moderator Emeritus

Re: Help on Credit Card shopping and its effect on FICO scores.

 


@Anonymous wrote:

One other quick question.  If I apply for, and receive approval for another card, yet choose not to activate it due to me not liking the terms of the card, will anything other than the hard inquiry hit be reported to the credit agencies?

 


As far as I know the inquiry will be all you have.

 

Message 8 of 11
Anonymous
Not applicable

Re: Help on Credit Card shopping and its effect on FICO scores.

Thanks again for the quick replies marinevietvet.

Message 9 of 11
Jazzzy
Valued Contributor

Re: Help on Credit Card shopping and its effect on FICO scores.

I don't know that I would pay $59 a year for a card that I wouldn't use. As you say, you are paying it to keep your oldest line open...but that line is only 3 years older than your other card. So...you are paying $59/yr to have a 10 year history instead of a 7 year history. So...you're not paying $59/yr for 10 years history...you are paying it for only 3 additional years history.

 

I think getting a card with a lower interest rate and a rewards program is a good idea. Keep the older card open until the month before the annual fee will hit again. Then cancel it. The older card will report for about 10 years. You may get a small ding for an inquiry and having a new account.

 

Your FICO score is already good. Don't spend money you don't have to. I try really hard not to let my FICO score cost me any money.

Message 10 of 11
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