Question about Credit Cards and Credit History

[LrnWithFn]

Hi All,

Is there any one-one relationship between Credit Card and Credit History? Is the usage of credit cards, only the way to build credit history?Say If I have three Credit Cards and I use One or Two out of them, very frequently and I almost do not use the third one, would there be any negative impact on my credit history? In such cases, Is cancellation of the unused card, way to avoid impact on Credit History?

Lastly, are there any free reliable sites, who would provide me my credit history and score as well.

Thanks
RN

[disneysteve]

Using credit cards is not the only way to build credit. Installment loans like car loans and student loans also count. Some apartments report rent payments to the credit bureaus. Some utiltity companies do, as well, so your phone bill or electric bill may help.

If you use 1 or 2 out of 3 cards, that's no problem.

Canceling the unused card will lower your credit score because it decreases your available credit.

The only site to get totally free credit reports is annualcreditreport.com. You need to pay for your score and should get that at myfico.com. If you search, you can find a discount code.

[poundwise]

...at myfico.com. If you search, you can find a discount code.

Like this one: FALLFCC11

Discount is for 20% off your FICO scores. Offer ends on October 22nd, 2008.

[kork13]

But that drop in the credit score wouldn't be permanent--over time it wouldn't matter either way, so long as you don't over-charge your CC's. As an example, if you have a total $15k credit limit, only charge total of $1k-$2k/mo, and pay it off every month, a $4k reduction in credit limit from closing 1 card still wouldn't put the person over 20% credit utilization, and the "rule" is to stay below 30%. So even if you spend $3k one month, it would still be below that.

Isn't there also something to be said for the simplicity and security of eliminating unused credit accounts?

I may just be playing the devil's advocate by challenging the "never close a card" wisdom, but I disagree that a responsible person should be concerned about closing one of 3 or 4 credit cards.

[boosami]

Capacity, or the ratio of available credit you have, determines almost 1/3 the makeup of your credit score. Canceling cards will always bring your ratio up, unless you have 0 debt. If you're under ~30% utilitization after cancellation, though, it won't have much or any lasting impact on your score.

Another factor, though half as important as capacity, is the length of time you have had credit, or your average account age. Cancelled accounts still contribute to this average age for 10 years after they have been canceled, so cancelling a card will not affect this part of your credit score.

If you aren't paying fees to keep the card open, you only help yourself by keeping it active. It will add to average account age indefinitely, and pad your available credit ratio. However, closing it while maintaining a low usage ratio won't hurt your score much either, and may be better for you in the long run as far as simplicity and security, as mentioned above.

[disneysteve]

If you aren't paying fees to keep the card open, you only help yourself by keeping it active. It will add to average account age indefinitely, and pad your available credit ratio. However, closing it while maintaining a low usage ratio won't hurt your score much either, and may be better for you in the long run as far as simplicity and security, as mentioned above.

Agreed. Keeping it open is best, but closing it doesn't have a huge effect and the effect it does have lessens over time.

[click4credit]

As the advice says here then there are lots of ways to build (and damage) credit history. Credit cards are of course a well known and good way but loans and other finance products can help as well. Also bill repayments may have an impact as well.
Try setting up automatic payments for bills and credit card repayments to ensure you never have a missed / late payment, that way you can avoid damaging your credit score. Also, avoid applying for too many products at the same time.