Credit score question

[texastek76]

I have always been told that having "old credit" helps your credit score, that is, if you positively maintain a credit card for a long period of time it reflects better than if you have only had a card for a short while (seems reasonable). This has lead me to keep our personal credit card for a long time even though is accures airline miles for an airline we rarely use. I have maintained a credit card for business expenses for five years that accures miles that we use.

Here is what I have:
Continental Airlines MC - $30,000 limit, no balance, 12% (personal use)
Southwest Airlines MC - $10,000 limit, no balance, 14% (business expenses)

I would like to cancel the Continental card and begin using the Southwest card for personal use. Both carry an annual fee but we get quite a bit of use out of the Southwest miles. I have two offers for AMEX cards that accrue points that can be used for miles, hotels, etc... I would like to get one of these to begin using for business expenses (no annual fee)

More background - we only use credit cards to make big purchases and accrue miles. The balance is paid off monthly. I pay for my own business travel expenses and am reimbursed immediately so no balance there either.

We plan on moving in about three-four years and I don't want canceling the high limit card to negatively reflect my credit. I also don't want to just add the AMEX (not cancel, but never use the Continental MC) because I hear that having too much available credit appears risky to lenders.

Longwinded I know. Anyone have any input on this? Thank in advance.

[noppenbd]

Try out creditkarma.com. They will allow you to simulate various actions and how they will affect your credit score. They also give you a free credit score (it may not be the real FICO, but it should give you some idea).

How about keeping the Continental MC open, open the new AMEX, and then request the credit limit be lowered on the Continental MC by the amount of credit offered by AMEX? So your total credit available would stay the same, but you keep the old card open.

[kork13]

Are those two CC's your only credit lines? How long have you held each card (continental and southwest)?

My best recommendation would be to open the AmEx card, request a reasonably comparable credit line on it (maybe $15-20k?), request an increase on your southwest card to maintain your total allowed credit to the $40k it's at now, then close the continental.

The biggest 2 reasons that closing credit cards can damage your credit is 1) decrease total credit available, increasing your credit utilization ratio; and 2) loss of good payment history on the closed card. #1 is dealt with by requesting higher limits on the AmEx and Southwest cards. #2 is not a significant problem, especially if the southwest card is about as old as the continental card. Payment history stays on your report for 7 years after your last payment. By the time the continental card totally drops off your report, you'll have established good payment histories on the AmEx and Southwest cards.

Even to be moving in 3-4 years, your credit will be just fine by then. With consistent good marks, a credit rating will recover fairly quickly from any potential "bad" marks. Assuming you have a strong credit history (seems reasonable, from what you've said), I highly doubt that your credit will tank, or even stay lower than normal for more than a year. It's always the most recent data points which hold the greatest weight, so as long as you manage it well after making this change, your credit will be just fine.

[disneysteve]

If you don't care about your FICO for 3-4 years, I wouldn't worry about cancelling a card now. The effect is not permanent and diminishes over time.

I wouldn't keep a CC with an annual fee just to preserve my FICO if I wasn't making use of the card.

I'd cancel it and move on.

[Investing First Steps]

My general philosophy is just to live my life and not worry about my credit score. I am a responsible person and all my debts have always been repaid, so I've never worried about the "rules" that should have nothing to do with good credit. As Steve says, if I cancel a card because the fee is unacceptable, that indicates nothing about my capacity to repay debt. If that hurts my credit score, they can just enjoy their flawed system.

Of course I almost never borrow for anything anyway, so it's easy for me to say. I'm sure if I were anxious to buy a house or not pay cash for a car I'd feel differently.

[responduser]

Maintaining a credit card for long may not necessarily give you a good credit score. For example if you are in debt and have missed payments ona number of times, then it will actually reflect negatively. And if you pay after the due date, then too it will reflect negatively.

Some credit card companies are known to maintain credit scores and credit records for as many as 7 years.

[Alex_Adviser]

Yea you are right in saying that Closing old credit cards that have some credit history do reflect in your credit score. But as you have also mentioned that you are looking forward to benefits like airmiles with card, then I think you can cancel out the alternative card that is not for use to you.

As you are determined enough that you make the payments on time every month, then you dont need to worry about the credit score as you could repair the same with your smart credit card usage.

Regards

[ksluis62]

I also think most people assume they need a super-high FICO score to qualify and get a good rate. FICO is just one factor. Having adequate income is just as or more important, and FICO doesn't consider income or assets.

I subscribe to Equifax Score tracker, and one feature shows mortgage rates at different tiers. The highest tier looks to be 760 and above. The next lower level, still considered very good credit, is 700 and above. The graph shows a 0.22% difference between the 2 tiers for a 30 yr fixed mortgage.

Not sure of your situation, but if you already have great credit, above 760, there's absolutely no reason to fret about this. Do what is comfortable card-feature wise. There are a lot of services selling programs to improve FICO scores (I've bought one!), and they've trained us to be over-sensitive, more so than we should.

ksluis
www-DueMinder-com

[Goldy1]

Last month money magazine had a pie graph showing what percentage of what equaled your credit score. It was interesting and said on time bill paying was only 35%. I Thought the way they get your score was top secret.
Also we have opened up cc accounts a few times to get one year no interest, and just paid it off before the year and then cancled the account right after. IT shows up as us havin gmore than the average number of cards for our credit history(a negative) but the score was still good/very good.

[mprich]

No good way?

The credit reporting scam is at the top of my list of things to hate right now. Not because I have bad credit but because of the insane way the reports are used. My wife and I are nearing "old age" so that we tend to be cranky about little things like people calling us deadbeats!! For background we have just refinanced our mortgage to take advantage of the record low interest rates. All went well as we were confident that we had always had excellent credit. Over the last forty years we have bought and financed many cars, boats, houses, etc. Now we get a credit report from the three big companies which burns me no end. For the sake of the discussion, please accept that we do pay all bills timely. Our scores were 775,787, and 805.
The "factors" portion is my complaint.
Length of time revolving accounts have been established. We have a Sears from the 70's and a Lowe's from about 90. Credit cards are only five years old as we changed banks and cards when we changed cities.
No. 2 is Lack of recent bank/national revolving information. The report shows our Lowe's card open/never late with a zero balance from 06 to current.
No. 3 is the killer. Amount owed on accounts is too high. I assume that referrs to the Chase Visa which we use most. We charge $1500-2500 per month on it and pay it off monthly but the report apparently takes the high for each month even when it is paid off. On a card with a $15,000 limit is $2500 too much even if we were just making payments??? How can ones account be knocked for no current info and at the same time be knocked for too high a balance???
Try to get your credit report corrected some time for a real headache. I look forward to any advise from you guys/gals who have succeeded. Right now we are at the stage of them refusing to discuss it in writing because I have not presented enough material to identify myself.

[ksluis62]

Our scores were 775,787, and 805.

mprich, those FICO scores are truly impressive. You are in the top couple percent of all consumers, and any lender would love to give you money. They'll want it back eventually, of course!

From what I see on my paid service through Equifax, your scores qualify you for the best possible mortgage rates (760 and above).

The factors affecting your scores are computer generated and not to be worried about in your case. They provide reasons you may not be in the top 0.1% of borrowers.

You can see more information about the FICO factors here:

How Your FICO® Credit Score is Calculated - myFICO.com

Also, about your Chase Visa: Chase will report your balance some time during the month at their convenience. If you happen to have a balance on that date, it gets reported. They don't specifically report that you pay in full every month. I've heard there are ways to find out the reporting day to better time your payments. But again, in your case, you have no need to spend energy raising your FICO.

[mprich]

I could perhaps write the whole thing off as just another institutional insult as our scores are okay. But then if there is no reason for the comments, why are they included? The ones I mentioned are not all the negative comments reported. If this function is called "fair trade", is it not expected to also be honest trade? If one pays for a service, which we did, doesn't one expect and deserve an honest service in return?
When they report that there is too much owed, it is not honest.
When they report that there is a lack of recent bank/revolving information, it is only because they did not look. That is not honest.
They also report there is insufficient length of credit history. That is not honest.
When it really hits is when we try to correct this report. The worst report of the three was by Experian so we started there with our efforts to correct the report. Of course we first did some research on the federal laws involved and what procedures were to be followed. From our research it sounds pretty straight to get it right. What a joke!
First, the correct number to call is not the one you see first. That number just gets you voice mail telling you to go down the street by internet. The real number is on page eight of the ten page report. That number also gets you nowhere but voice mail with none of the choices that apply to us. That's when we went to the written complaint. Their response was to send information that we could buy a recent report and that they can not discuss it without us sending numerous documents to idenify ourselves. Mostly they want to sell us a credit report.

That is not honest!

What we have learned is that the credit report industry is set up by and for the banking/credit industry. WE all know where that leaves us, don't we?

[mprich]

In response to the information/ suggestions by KSLUIS above, I would like to send my thoughts. One way to get some of the comments/factors on our report changed is to change our spending habits. That seems to be what the credit report is aimed at doing. To remove the stigma of not enough to report we could always run a credit card balance. Then they would see something to report but it would cost us credit interest. We could also alternate the use of several cards thereby making it look like we pay promptly. That means we would have a hassle and not use the card with the best money back feature costing us again. We could try changing from our Chase card to another card but then we would be hit for not having the card long enough. What it looks like is the true situation is that they will report something negative any way we go unless we agree to spend more money with the banking/credit indusrty. Is that an honest business plan?

[Cylenchar]

The credit reporting scam is at the top of my list of things to hate right now. Not because I have bad credit but because of the insane way the reports are used. My wife and I are nearing "old age" so that we tend to be cranky about little things like people calling us deadbeats!! For background we have just refinanced our mortgage to take advantage of the record low interest rates. All went well as we were confident that we had always had excellent credit. Over the last forty years we have bought and financed many cars, boats, houses, etc. Now we get a credit report from the three big companies which burns me no end. For the sake of the discussion, please accept that we do pay all bills timely. Our scores were 775,787, and 805.
The "factors" portion is my complaint.
Length of time revolving accounts have been established. We have a Sears from the 70's and a Lowe's from about 90. Credit cards are only five years old as we changed banks and cards when we changed cities.
No. 2 is Lack of recent bank/national revolving information. The report shows our Lowe's card open/never late with a zero balance from 06 to current.
No. 3 is the killer. Amount owed on accounts is too high. I assume that referrs to the Chase Visa which we use most. We charge $1500-2500 per month on it and pay it off monthly but the report apparently takes the high for each month even when it is paid off. On a card with a $15,000 limit is $2500 too much even if we were just making payments??? How can ones account be knocked for no current info and at the same time be knocked for too high a balance???
Try to get your credit report corrected some time for a real headache. I look forward to any advise from you guys/gals who have succeeded. Right now we are at the stage of them refusing to discuss it in writing because I have not presented enough material to identify myself.

Credit reports are screwwy, take it form someone who looks at them everyday. They always will have three reasons listed for your scores, even if you have perfect credit. I had a 783 when we bought our house, and depending on when they pulled it, I was using maybe .01% of my available credit, but still had the amount owed too high.

[GREENBACK]

This makes me wonder if the mythical perfect score is really possible by anything other than a machine. I stopped worrying about the comments. It gets you nowhere. As long as you're in the top tier why worry even if you're planning a loan.