Paying off...

[Anonymous]

I have the chance to pay off all of my credit cards (@8900 owed with CL of $14,300)  In doing so my BF thinks that I should then close the accounts and we will then have a joint credit card.  I am curious how that will truly affect my credit score.  We are trying to get it to 640 and depending on where I look I am between 581-619.  

[SouthJamaica]

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@Anonymous wrote:

I have the chance to pay off all of my credit cards (@8900 owed with CL of $14,300)  In doing so my BF thinks that I should then close the accounts and we will then have a joint credit card.  I am curious how that will truly affect my credit score.  We are trying to get it to 640 and depending on where I look I am between 581-619.  

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That would damage your credit score.

The best thing you could do would be to pay all credit cards down to zero, except for one with a $10 balance, which you would promptly pay off after the statement cuts.

And close none of the cards.

And no, you should not have a joint credit card.

[Anonymous]

Your credit score will take a nosedive. NEVER close your existing tradelines. You'll need them evetually. BIG NO NO on the joint credit card. Get a free copy of your credit report and review what's keeping your scores down.

[RobertEG]

FICO places significant emphasis on your showing of how you use your discretionary credit.

Your revolving accounts demonstrate how much debt you decide to accrue, and whether or not you show a history of timely repayment of that discretionary debt.

Having multiple revolving accounts is important, both as to your mix of credit and your scoring of % util of revolving credit.

It permits FICO to see that you are using discretionary credit by having a balance on at least one revolving account, while simultaneously keeping util low or at zero on others, and by having less than half your revolvings reporting a balance.

I would maintain at least revolving accounts, particularly if you already have them, and thus dont need to burn an inquiry or add a new account that will lower your average age of accounts.

Conventional wisdom is not to close revolving accounts unless you have a reason other than credit scoring, such as if the creditor is charging an annual fee to maintain the account.

[Anonymous]

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@Anonymous wrote:

I have the chance to pay off all of my credit cards (@8900 owed with CL of $14,300)  In doing so my BF thinks that I should then close the accounts and we will then have a joint credit card.  I am curious how that will truly affect my credit score.  We are trying to get it to 640 and depending on where I look I am between 581-619.  

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Great comments by everyone.  A couple quick thoughts/questions for Alikerley...

I can see this is maybe your 3rd post here on the Forums.  So welcome!  We hope you stick around.

Can you help us understand better what might have been driving your boyfriend's concerns and proposed plan?  Is he worried about the risk of you guys running up a bunch of CC debt again?  Or was he honestly thinking that closing lots of cards might be good for your score? 

If it's the former, let us know.  He's trying to protect the two of your from future balloning debt, which is a very good concern.  We can huddle with you and find strategies that will work -- basically a way for you to lock the cards away so you don't ever see them. 

If it's the latter, that's not a dumb idea.  Most people new to credit scoring intuitively expect that FICO might score you badly if you have a ton of credit cards -- and that closing them might show financial responsibility.  That's not a crazy thing to expect -- it's just that FICO doesn't work that way.

So to recap, definitely pay them off, and definitely do not close them.  We can help you and your BF solve whatever it is he's concerned about.

[Anonymous]

His reasoning is that 1. his credit is better than mine and we are hoping to buy a houe 2. I tend to spend so not having the option would help.  He has stated that yes my score would drop but we can deal with that as it comes ... he is afraid of the monthly/yearly fees associated with some of the accounts.  (again not great credit score so I got the "started" cards. 

[Anonymous]

You can always do the ice cube trick.  Keep  the cards but put them in water and let it freeze.  To use the cards you have to plan way ahead  Never did this but know of sever people who may have.

[Anonymous]

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@Anonymous wrote:

His reasoning is that 1. his credit is better than mine and we are hoping to buy a houe 2. I tend to spend so not having the option would help.  He has stated that yes my score would drop but we can deal with that as it comes ... he is afraid of the monthly/yearly fees associated with some of the accounts.  (again not great credit score so I got the "started" cards. 

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His thinking makes a ton of sense when it comes to the fees.  I suggest you divide your cards into four categories.

(1)  Cards with a monthly fee

(2)  Cards with an annual fee where the annual fee is coming up fairly soon

(3)  Cards with an annual fee where the annual fee won't be coming up for a while

(4)  Cards with no fees at all

I'd close everything in #1 and #2 -- as long as your have four cards total in #3 and #4.  I'd keep the cards from #3 open until 60 days before the fee is due and then close it.

His thinking is a bit off when he says that it is ok if your score gets hurt but he also wants you to be preparing for a mortgage.  His higher scores won't offset yours when it comes to buy -- the lenders will use the weaker of the two people.

His thinking is REAL smart when it comes to wanting you to control spending.  But the best way to do that is for him to hold your cards so you don't have access to them.  (That assumes you both have solid trust about that.)  Closing the cards, however, is a bad way to solve that.

[Anonymous]

I really like the ice cube trick.  It's especially good if these are pretty big blocks of ice.  Something where you'd really have to work at thawing.  A little ice cube can be thawed pretty easy.

There are many other variations on the same theme.  Bottom line is that it should be possible to keep these tradelines open but in a way that you won't be realistically tempted to use them.

[Anonymous]

PS.  If your boyfriend is a little skeptical about us urging you to keep your cards open, that's understandable.  He might think we have some weird pro-CC bias, where we worship at the shrine of credit cards or something.  That's a healthy concern if he has that

But honestly, it's really true that if you were to reduce the total number of open cards that you have to much below four you will be hurting yourself when it comes closer to mortgage time.  For one thing, the old mortgage scoring models get a real kick out of seeing a person who has several cards and all but one are showing a $0 balance.  They love that.  There's not really any advantage to having more than five, but every card you have lower than 4 will make it harder for you come mortgage time.