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August 29, 2005


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The question that's always stumped me is how much credit limit to have. Have too little, and your debt/limit ratio is too high. Have too much, and your limit/income ratio is too high. All the advice on credit limits out there that I've seen is nonsensically vague because no one really knows the details of the FICO proprietary algorithm.

When payments are late by a few days, you get a late fee, but I do not see it on my credit report.So how can it affect my credit score or my interst rate on my other cards?

One major credit card, always paid in full each month when used is enough.

A commentary about those "cash back rewards" credit card "deals":
When you use a credit card, the money for your "cash back" comes from the fact that the credit card company charges the vendor/store an EXTRA 3% to 5%, for the privelidge of using the credit card. The vendor then charges all the other customers the extra 3% to 5% to cover their costs. Therefore, every "cash back rewards" credit card afficionado is effectively increasing the costs of every other customer. Personally, I prefer to use cash which doesn't cost anyone an extra 3% to 5%.

"Therefore, every "cash back rewards" credit card afficionado is effectively increasing the costs of every other customer. Personally, I prefer to use cash which doesn't cost anyone an extra 3% to 5%."

True as that may be, cash costs a retailer as well...extra bank drops, armored car service, and security (as long as the risks of theft and robbery that cash takes). Also, it takes longer at the end of the day to make sure a till comes out correctly, count the cash, keep records of it, while with credit purchases this is all automated.

Also, I don't know why your argument is limited to cash back rewards...the extra 3% is charged to all retailers for all credit cards, regardless of whether they give cash back rewards or not.

To bypass both the problems of cash and credit cards? Use a debit card. A store isn't charged extra for running it, it's less hassle than cash, and you still have a record of the transaction without having to keep track of paper receipts.

Try to find a retailer that does not accept credit cards today. Not to mention the fact that many stores have historically given discounts for cash purchases, but this is not the case anymore. This means it's not worth the extra hassle to encourage more customers to use cash, otherwise, why not give a cash discount? (though I hear in Europe credit card companies actually made that illegal)

I you might say play the credit cards. I have so many offers in the mail every week I can pick the best ones. I pick one that gives me o% for one year and at the end of the year I take another one and tranfer the balance as long as there is no transfer fee. My credit is excellent infact it is 760. Susie O. says get your credit cards to 0 balance but DO NOT CLOSE THEM. Susie says this will hurt your credit. Well I do not keep a balance on any except the wedding one. It started out 5,000.00 and is now down to 3500.00. This is the card I keep rotating. Before this one I did college the same way. I never pay any interest. My problem is I am up to 15 card. only one has a balance. Some cards I've had for 10 or 15 years. Do I close them or not. They are just setting her with on balance. Do I close the oldest or the newest?????????? Please give me some advice. Thanks

Dennis, even with 15 credit cards, I would say that if you still have a credit score of 760 then you are obviously very responsible with your credit and your limits relative to your income are within acceptable ranges to have what most would consider optimal credit worthiness. Therefore you don't NEED to close any of the cards. However, based on the dollar value of debt you mentioned as a forecast of your income, I would think that if you do choose to close a couple of cards you would likely raise your credit score by lowering your limit/income ratio to a more optimal level. If you follow my advice then close the newer cards first, especially ones that you have only used to transfer the wedding balance and have actively used the least number of months. Credit scores are higher when you show that you have a long-standing blemish-free record with a few companies you are faithful with. Also you might want to pull them out of the closet and use these "golden oldies" from time to time. You may even get your credit score over 800 after you do it but as Dan pointed out earlier no one really knows the details of the FICO proprietary algorithm. I do know however that many credit checks and a lot of credit activity such as opening or closing accounts will temporarily lower your credit score, so keep that in mind over the short term.

I also rotate the 0% deals and have got 3 cards almost maxed out with over 20k in "free" money. I've seen my credit score drop from 790 to 730 over the last 3 years as I've done this with increasingly larger amounts of money (I also close each "old" account and only keep about 6 active at any one time) but my big mistake was closing my first credit card that I'd had open for about 15 years. I just didn't want you to make the same mistake I did. Also I'm worried that if I get my debt too high I may not get any more 0% deals and be forced to get a home equity loan to pay off all the cards. However that's not such a bad option as they are currently about 8% and have very small if any extra fees (application/transaction or closing costs)and the interest is usually tax deductible. You might have noticed that most cards are now charging a 3% transaction fee to get the 0%... they are getting wise to people like us. But some have a $50 max and I figure that with my car loan at 7.5% I'm saving $750 each year for every 10k I charge at 0%. I don't mind paying the $50 but 3% is pushing it and may not be worth the drop in credit.

One other thing that saved me A LOT of money was using the 0% balance transfers on credit cards to help me pay down my home mortage to 80% loan to value to remove the PMI. Ideally, you'd want to do this before you close on your house otherwise you'll likely have to pay $200+ to get your house re-appraised like I did. However, I would only do this if you are responsible with your credit and can pay down most of the credit card debt in the next year if you have to. The banks may make getting 0% even tougher in the future and you don't want to get stuck with 20k in credit card debt at 14.9% or more!

To my mind it's resonable to have two credit cards, and pay off the balances each month. If you've gotten carried away and have five- six, or more cards, consider the benefits of closing out most of them:
1.simplicity. Fewer cards will be easier to track. In addition, you'll have a much better sense of your overall debt level when it's on one or two cards, rather than spread across a bunch of them.
2. better credit record. You'll want to have at least one credit card to help build your credit history. If you're married, your spouse should have at least one card in his or her name only, for the same reason. Too many cards can hurt your credit rating, particularly if they all have large unpaid balances.
3. less temptation. The more cards you have, the easier it is to rationalize excessive spending.
So fewer cards, lower balances: that's goal.

Here are the reasons to have more than one credit card:

- Acceptance. You may find that the best deal for you is an American Express credit card or a Discover Card. But many merchants don't accept those cards, so you'll probably want a Mastercard or Visa as well.
- Backup. You might find that you lose your credit card, or it gets stolen. Having at least one backup card can be helpful.
- Different cards offer higher rewards on different types of purchase. Some credit cards offer higher rewards on gas, some on groceries etc

The writer states that you should pay off your credit cards at the end of the month. Actually this isn't they best thing to do if you want to build up your credit score. As a general rule, it's best to build a balance of around 30% of the limit and pay off more than what you spend in one month on the card until it's below 10%. For example: Your card has a $5,000 limit, and you spend $500 a month on the card - Build to a balance of about $1,500 and pay $500 or more until you get the card down to below $500 before spending more than you pay. There are many factors involved in calculating your credit score. Some of which take into account you ability to manage debt. If you have the ability to pay the card off each month that's great, but that doesn't impress creditors too impressed. They know you're not going to be able to pay off your house or car anytime you want.

Dave, you actually want people to pay interest on credit cards when they can simply pay them off? How wise is that?
I’m not giving away my hard earned money!!
I’d rather have a slightly lower FICO and save the $$$$$$$.

I have a very good credit score and carry around only 1 credit card... I use this credit card to pay for my gasoline and random little items and pay off the entire balance 2-3 days after making the purchase... Is this a good practice?

Ofcourse i don't want to pay my auto loan of $400 every month by using a credit card... that would be just stupid! Plus why do you want to pay the credit card companies interest when you can earn 5% interest from HBC's online savings account!?

Dave...I don't think that is the best way going about things (by not paying the full balance). By not paying the entire amount, you get charged interest on the entire amount which is about 10%. i don't think the difference of 5-10 points on your credit score will mean a 6% homeloan vs a 10% homeloan. I would rather save the money now, and if I get screwed in the process (that nobody but creditors know), then I get screwed.

Abdulrasool...You don't need to pay off your purchases right away. I would wait until the end of the month instead and just pay on time. I think some places like Chase limit you to 5 online payments per month

I have 15-18 credit cards...I don't even remember them all unless I pull them out of my closet. I'm obsessed with credit cards...Visa, Master, American Express, Discover....I love them all...the power of purchase...whenever and wherever I want.

My credit score is 790.
So, I don't think having many credit cards hurts your score as long as you pay on time and keep balances low and spread them around your 20 cards!

I hate to see people offering their advice when they have no idea what they are talking about. The amount of credit cards you have does not affect your FICO score unless they are issued by some department stores that use a small finance company. Major Department stores are fine. (Although you can still get turned down for credit because you have too many open accounts - but it does not lower your FICO). YOU DO NOT HAVE TO KEEP A BALANCE ON YOUR CARD to obtain better credit. Just use the card every other month, never going over 19% of your credit limit. NEVER TAKE A LOAN OUT WITH A FINANCE COMPANY OR A COMPANY WITH BANC IN IT'S NAME. You will have points deducted for this. If you really want to know more about what affects your FICO and what does not, pick up a copy of "Best Credit" by Dana Neal. It's the best, updated book on credit scoring on the market, written by a guy that knows a hell of lot more than anyone posting on here. The book contains everything you need to know to achieve a perfect FICO score (includes sample letters and forms and information on how to deal with removing adverse credit from your reports).

I have a pretty good credit score but I hope to increase my score in hopes of getting a home one day. I pay my bills on time regularly and never missed a payment. However, I made the mistake of opening up two store cards about a year ago and as a result my FICO score got lower. I hardly use the cards now---I was just taking advantage of the store "discount" for opening up an account. From reading the previous posts, the writer mentioned that Susie O. recommends not closing any accounts because it will affect your credit score, however, I no longer use either card and don't intend to anytime soon. Should I just go ahead and close both accounts or keep them open? The reason why I ask is because I plan to get a second credit card, and it's my understanding that having too many credit accounts will affect your FICO. Another problem I'm facing is that the two store cards I currently have a low credit limit - only $2,500. I's my understanding that having a too low of a credit limit lowers your FICO score. I intend to request a higher limit on my second card so again I'm just wondering if it's worth closing the two score credit cards now to minimize the # active accounts I have. Any help is appreciated. Thanks!

I ruined my credit score when I was younger. Now I have a family and every once and a while we need to use a credit card for things. I have nine cards now. Problem is since I ruined my credit score and I'm rebuilding, none of them have limits over $1000. Thats the only reason I have so many. I wish I could just call one of the cards I have and just have them all consolidated into one.

A lot of people are saying they have 15+ credit cards and high credit scores. I just wanted to say that I have 2 credit cards, I'm 24 years old, and I have a 790. It doesn't take anything special to have and maintain good credit. Just be responsible, have credit and USE it occasionally to show that you can handle it. You don't need 15 credit cards to do it. Spend your free time doing something more enjoyable than juggling credit cards.

Yeah the 50 number of cards per person sounds a little crazy for sure!

On CCF they say it’s basically okay to have a few cards but to avoid the store credit cards because they can hurt your credit and aren’t worth it.

This re-emphasizes what you mentioned about store credit cards knocking off up to 20 points. They said the same thing there.

Keep your credit cards to a minimum because that shows lenders how responsible you can be. Not that you are not responsible when you have 10 or more,However keep your balances as low as possible or you will look like a high risk no matter what your credit scores says.

I have a credit union VISA card, and a United Mileage Plus VISA card that has an annual $60 fee. I travel a lot and am also a United 1K member. So long as I maintain United 1K status, my $60 fee is waived. I earn 2 miles for each dollar charged on most things, like gas, groceries, hardware stores and the like. My wife and I use our United Visa card for nearly everything and earn anywhere between 5 and 9 thousand miles a month, which equates to lots of airline miles in the long run that I use to fly my son in Graduate School back and forth from Pepperdine to Hawaii about twice a year, and my wife R/T to Japan annualy to visit her parents (First Class). All this free travel is a whole lot cheaper than purchasing tickets for our family. Oh yes, we pay off the card in full every month and have never paid a dime in balance from month to month. We use the Credit Union card just once in a while as a back up and pay that off too. My wife has an AMEX card, only because she shops at COSTCO (the only card they take) used to be Discover but is now AMEX (pay that off every month too).

I am contented with my credit card and I don't plan to get another credit card. The fewer the credit cards you have the lesser the problems you have in paying for it.

I have been guilty of opening credit cards to get the 10-15% off. I would say I have about 10 cc's right now, but I only use one of them regularly. The rest of the cc's I haven't used in months or years. If you don't use a cc for a certain period of time, will the account go into an inactive state or just close? Do I have to call and close those cards that I probably will never use again? Also, are there rules I should know about closing CC's so that my credit score won't be negatively affected?

Right now I have only have a Visa Gold, it sounds like I should get at least 1 more card. My question is, should it be another Visa or should I apply for a Mastercard? Does that make any difference?

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