Credit Card Article

[sweeps]

Deal yourself a new hand of credit cards

[Bookie]

Re: Credit Card Article

Enjoyed the article, and I agree with the author -- given the assumptions made.

I also know that for me it won't work. I have credit cards, and I use them in a budgeted, planned out fashion. But . . . using cash, I will always tend to spend less than when I go for the plastic. Somehow, the pain of signing my name, even knowing that I will clear the account at the end of the month, never can equal the immediacy of handing over currency.

It's not that I will spend extravagantly, or evn unwisely, but I will spend more.

[PRICEPLUS]

Re: Credit Card Article

That was an interesting article. I guess it makes sense for people who use CC's regularly. I am trying to pay off and not use them at all.

[piggybank4]

Re: Credit Card Article

I guess there's no "system" or "rule" that can bring results 100% of the time, even when someone is completely lacking in self-control or discipline.

No system works for someone a slave to TV ads, who loves to shop, etc.

[disneysteve]

Re: Credit Card Article

I must say I grow more and more tired to see that paying off the balances every month is equated with not overspending and thus the absence of wasteful habits.

Someone who pays his card off in full each month is living within his means. That doesn't mean he couldn't do better and spend less, just that he isn't spending more than he can afford to, which I think we'd all agree is a good thing. But I get your point. Someone could pay the bill in full each month and still be buying things they don't really need.

[PRICEPLUS]

Re: Credit Card Article

Amen to that!

[hrbatyfan]

Re: Credit Card Article

I always pay my credit cards off in full each month, and I have 2 credit cards.

One is a starter Visa card, and the other is an Amex Blue Rewards card. I use the Amex most of the time, unless they do not take Amex.

I am thinking about getting a few more rewards cards to maximize my money, but I have a question about having multiple cards and my credit score.

If I have 4-5 credit cards which I all have the ability to pay in full each month - should I 100% always charge to my best rewards cards and not bother with my older cards (but still keep them open?), or should I at least make one charge a month to all my cards to keep a paying record on them for credit score purposes?

[poundwise]

Re: Credit Card Article

I always pay my credit cards off in full each month, and I have 2 credit cards.

One is a starter Visa card, and the other is an Amex Blue Rewards card. I use the Amex most of the time, unless they do not take Amex.

I am thinking about getting a few more rewards cards to maximize my money, but I have a question about having multiple cards and my credit score.

If I have 4-5 credit cards which I all have the ability to pay in full each month - should I 100% always charge to my best rewards cards and not bother with my older cards (but still keep them open?), or should I at least make one charge a month to all my cards to keep a paying record on them for credit score purposes?

What one chooses to do is based on a lot of factors. When it comes directly to considering your credit score, however, there are a few truths (more or less) to keep in mind.

Opening new credit card accounts hurts your credit score in the short term. This is especially true if you submit multiple applications and open multiple new accounts in a relatively short time-frame.

You probably knew, or assumed, that.

However, what most people seem to not understand is that keeping card accounts open, but not using them, also hurts your credit score.

Many people will tell you not to close your cards, especially the ones you have had a long time, due to the fact that doing so can hurt your score by lowering the average age of credit accounts. This is true. Closing old accounts has a similar effect to opening new accounts in this regard. However, FICO also states that having open credit and not utilizing it will also hurt your score.

The bottom-line is probably more common sense than anything. Don't apply for lots of new credit, don't hold lots of unused credit cards, don't close credit cards that still have a balance, don't close older accounts until you have more established credit overall, etc.

[poundwise]

Re: Credit Card Article


As a very general review of the article, I think it is a little excessive. The idea proposed early on of 'loading up on plastic' seems like a bad approach for anyone.

Understanding what is available and utilizing offers that make sense for you may, in fact, be quite wise. However, as I mentioned in my previous post, applying for and opening multiple new accounts, regardless of the rewards they may offer, will hurt your credit score. Especially if you do one of two things in conjunction with that: (1) close old accounts, (2) obtain 4 or 5 new cards but only use 1 or 2.

I think a much better method is to neither be overly concerned with your credit score, nor 'play games' with credit cards, reward programs, balance transfers, etc. Take care of your credit, use cards to manage cash flow, take advantage of a rewards system that works for you, and that's, ultimately, about the best one can do, IMO.

[sweeps]

Re: Credit Card Article

However, FICO also states that having open credit and not utilizing it will also hurt your score.

Poundwise, do you have a source for this?

[Ima saver]

Re: Credit Card Article

Well, I did not know that having open paid off cards would hurt your score. We mainly use our cash back card to buy materials for the houses we build, so it is always paid off every month and we never buy anything we don't use in building.

[poundwise]

Re: Credit Card Article


(from myfico.com, Credit Education)

Length of Credit History

* Time since accounts opened
* Time since accounts opened, by specific type of account
* Time since account activity

(end)

If you are late on a payment, that is reflected in the 'Payment History' portion of your FICO score. One of the components of that is 'Time since (recency of) past due items.' The longer it has been since delinquency, the better it is for your score.

In a similar way, a component of the 'Length of Credit History' portion of your FICO score is 'Time since account activity.' In this case, the longer it has been since utilization of a given source of available credit, the worse it is for your score.

[poundwise]

Re: Credit Card Article

Poundwise, do you have a source for this?

(from myfico.com, Credit Education)

Length of Credit History

* Time since accounts opened
* Time since accounts opened, by specific type of account
* Time since account activity

(end)

If you are late on a payment, that is reflected in the 'Payment History' portion of your FICO score. One of the components of that is 'Time since (recency of) past due items.' The longer it has been since delinquency, the better it is for your score.

In a similar way, a component of the 'Length of Credit History' portion of your FICO score is 'Time since account activity.' In this case, the longer it has been since utilization of a given source of available credit, the worse it is for your score.

[poundwise]

Re: Credit Card Article


Another thing to consider, in regards to having paid-off but open credit cards, is that the 'Amounts Owed' portion of your FICO score includes a component called 'Proportion of credit lines used,' which is described as the 'proportion of balances to total credit limits on certain types of revolving accounts.'

If you think getting that porportion, or ratio, down as low as possible is best, then you are mistaken. Just as having 90% utilization of your credit is a bad thing, having only 10% utilization is also bad, in terms of the effect on your credit score.

At some point, holding open credit lines for the purpose of helping your proportion/ratio is counter-productive. I have seen some commentary as to what level is best according to FICO, but I have never seen FICO detail exactly what that is. I suppose it may vary depending on other factors.

[hrbatyfan]

Re: Credit Card Article

I was told by someone having lots of credit available, but not used is a good thing. (IE - you have good enough credit to get a large line, but you aren't up to your gills in debt)

I have no idea if this is true, or to what extent. I don't believe the person was recommending getting every card possible and letting it sit dormant to increase my "available and not in-debted credit", but who knows.

From what you guys are saying, though, is that it would be advantageous to keep one of my older cards alive (despite my reward cards being the best one to use) and make one charge/payment per month to keep it current and active.