Credit score questions.

[Matt2]

I currently have two lines of credit open. One is $2,300 and the other is $6,300, equaling $8,600.

Assume I have never missed a payment on any credit card ever (which I haven't) and I always pay more than the minimum payment. If I close one of those lines of credit will my credit score decrease? Conversely if I open another line of credit will that decrease my score?

I have extremely good credit for only being 22 years old. I'm really inexperienced when it comes to this, but I am as responsible as one can be. I never charge anything I can't pay and I have never even approached either limit.

Just trying to find out the facts before I make any other moves regarding credit cards.

 

[Kelvrick]

Which one would you be closing? How much of a balance is each of them carrying?

Why are you closing? Balance transfer? What?

 

[SmoochyTX]

Which is your oldest card or account? What are your APRs on both?

 

[George P Burdell]

Any particular reason why you want to close a line of credit?

 

[Matt2]

I would be closing the $2,300 card. It is a Best Buy credit card. I currently have a $900 balance on it (Bought a TV) which I expect to be paid off in 3 months or less. It was one of those 18 months no interest promotions. The reason I want to close it is because once I pay off this $900 it turns into a high interest (22%) credit card that I neither want or need.

The $6,300 credit card is a Bank of America credit card that has a 7.9% APR and the current balance on that bad boy is $288. This is the oldest account.

 

[newnameman]

Keep it open and don't carry a balance.

 

[George P Burdell]

Originally posted by: Matt2
I would be closing the $2,300 card. It is a Best Buy credit card. I currently have a $900 balance on it (Bought a TV) which I expect to be paid off in 3 months or less. It was one of those 18 months no interest promotions. The reason I want to close it is because once I pay off this $900 it turns into a high interest (22%) credit card that I neither want or need.

The $6,300 credit card is a Bank of America credit card that has a 7.9% APR and the current balance on that bad boy is $288. This is the oldest account.

Closing that account may have a negative effect on your credit score. If the card has no annual fee, how about keeping the account active but cutting the card up?

 

[SmoochyTX]

Originally posted by: Matt2
I would be closing the $2,300 card. It is a Best Buy credit card. I currently have a $900 balance on it (Bought a TV) which I expect to be paid off in 3 months or less. It was one of those 18 months no interest promotions. The reason I want to close it is because once I pay off this $900 it turns into a high interest (22%) credit card that I neither want or need.

The $6,300 credit card is a Bank of America credit card that has a 7.9% APR and the current balance on that bad boy is $288. This is the oldest account.

I would pay off the BB card and then close it (what you're planning on doing). I wouldn't close the BoA card though. Pay off the balance and make sure that anything you put on it in the future can either be paid off in the next payment or two.

 

[BigJ]

Keep the BestBuy card and just cut it up. That way you won't be tempted to use it. It will help lengthen the average age of your accounts if you do decide to open up new lines of credit (longer age is a good thing).

 

[Whoozyerdaddy]

Are these credit cards? If so, just pay them off. Don't close them. A big part of your credit score relies on the age of your accounts. The older the better.

Closing those accounts and opening a new one will have a detrimental effect on your score as you will have lost two older accounts and opened a new one.

I have one credit card that I never use anymore. But I keep it because it's my oldest account. I'll hold on to it forever if I can.

 

[Matt2]

Here's another question.

On the B of A card, if you hold a balance that decreases your score even if you're paying more than the minimum?

 

[Skeeedunt]

Originally posted by: Whoozyerdaddy
A big part of your credit score relies on the age of your accounts. The older the better.

Does this include checking/savings or just credit cards?

 

[BigJ]

Originally posted by: Matt2
Here's another question.

On the B of A card, if you hold a balance that decreases your score even if you're paying more than the minimum?

If you're holding a large balance it will hurt your credit score. I'm not sure what the number is, but you want to remain low on how much credit you utilize. I believe they tell you not to hvae more than a 50% of the total limit balance on the card otherwise it's a big ol' negative mark.

 

[Matt2]

Originally posted by: BigJ

Originally posted by: Matt2
Here's another question.

On the B of A card, if you hold a balance that decreases your score even if you're paying more than the minimum?

If you're holding a large balance it will hurt your credit score. I'm not sure what the number is, but you want to remain low on how much credit you utilize. I believe they tell you not to hvae more than a 50% of the total limit balance on the card otherwise it's a big ol' negative mark.

Gotcha. Cool. I got scared for a second. I've been holding a balance on that card for about six months. The current balance of $288 is the highest it's been, but when the limit is $6,300 I think I'm ok.

I think I'm going to keep the BB credit line open and just cut up the card like you guys said.

Thanks for all the info. This has been very enlightening.

Now what would the effect be of opening a new line of credit and transferring the balance of the B of A card to a lower interest account? What about just plain opening a new line of credit?

I know I probably sound really dumb not knowing these things, but as I said, I am young and have a very high score so I dont want to mess it up due to ignorance.

 

[kranky]

Don't close the card. Just quit using it.

Part of your score is based on "utilization" - the percentage of available credit you are using, and the lower the better. And you have no control over when the issuer reports your used balance - it could be in the middle of the month before your bill is even due.

So let's say you charge $2,000 and you will pay it off in full when due. If your issuer reports your balance as $2,000, you have utilization of 23% the way things are now. If you close the BB card, that same $2,000 balance will mean a utilization of 31%. Going over 30% is generally believed to be a threshold which will lower your score. Same for 50% and 90% and the impact grows as you hit the higher thresholds.

So keep the BB card open.

 

[LS20]

unless youre trying to buy a house in the near near future, its not a big deal whatever you do

 

[SoulAssassin]

Originally posted by: Matt2


Now what would the effect be of opening a new line of credit and transferring the balance of the B of A card to a lower interest account? What about just plain opening a new line of credit?

You're going to transfer a balance of $288 that's currently at 7.9%? Why? You're paying like $2/mo in interest. If there's a bt fee you just killed the already infinitesimal small difference, if you get 0% for 12 months and no fee you save a whopping $24.

In general, when applying for a new card you'll take a small (5-10 point) hit on your credit score but it will rebound in 6 months or less. No big deal but I wouldn't do it for the balance transfer you describe.

 

[Matt2]

Originally posted by: SoulAssassin

Originally posted by: Matt2


Now what would the effect be of opening a new line of credit and transferring the balance of the B of A card to a lower interest account? What about just plain opening a new line of credit?

You're going to transfer a balance of $288 that's currently at 7.9%? Why? You're paying like $2/mo in interest. If there's a bt fee you just killed the already infinitesimal small difference, if you get 0% for 12 months and no fee you save a whopping $24.

In general, when applying for a new card you'll take a small (5-10 point) hit on your credit score but it will rebound in 6 months or less. No big deal but I wouldn't do it for the balance transfer you describe.

Well I wasnt going to actually do it.

I was more just trying to find out the effect of balance transfers in general.

 

[Kappo]

Balance transfers wont hurt or help your credit scores.

Since this is a store card (which are all crap, btw) it wont hurt you to close it. Your utilization will go up, so maybe a point or two it could go down.

For all you want to know about this kinda stuff... go read the fatwallet.com forums. Just dont be tempted to do anything strange you may see there until you have a GOOD grasp on how things work.