Stupid question about credit

katiewhompus

When H and I bought our house we had super credit. I'm assuming the house put a dent on that, but we also paid off a credit card that had been cancelled which was probably a plus.
We are wanting to get a new credit card because our current one doesn't do jack for us and we will probably not be using that bank soon. What would be a better credit scenario.
1) Apply for new credit card (Discover) and keep the bank one, but not use it.
2) Apply for new credit card and close account on bank one immediately
3) Apply for new credit card and close the bank one in a few months when we transfer our money from that bank.

maratea

I've always heard that closing an account makes your credit worse. I could be wrong. I only have one cc and it's still open, so I really don't know that much.

number55

Your credit shouldn't be affected by the fact that you own a house. If you were approved for a mortgage and your mortgage is within that range having one does not affect your credit score (although it will limit how much credit is made available to you.) I believe that your credit score is based on how much assets you have, in relationship to liabilities, along with your history of paying bills.

I don't think there is really much difference in your three situations (I use the term think because I am by no means an expert). I used to have about 4 credit cards (two mastercards, a visa and a store card). Right now I technically have 2 (my one main mastercard that has a huge limit and a store card that we got when we bought FIs wedding band. I have to remember to cancel it since clearly I don't need it). I really don't think that having one card or two will make a difference as long as you are paying them. That being said, I haven't paid a cent in CC interest in about 4 years. I use it but I pay it off every month before it accrues any interest.

LuluP82

Closing the account will damage your credit. Your credit score is made up of bunch of stuff, but one of them is how much available credit you have vs. how much you're using. If you're at the limit of credit available to you, it's a negative; having more credit available is a good thing, unless you have so much that the creditors think you have the possibility of charging too much up to pay off, ever.

The house shouldn't affect you negatively unless you don't pay the mortgage on time.

TurtlesAllTheWayDown

Any credit card increases the amount of credit you have available, and will therefore increase your credit/debt ratio (even if that ratio is $5000 to 0). So no, you shouldn't close the card. You might want to charge something small on it and pay it off right away every few months to keep it active.

katiewhompus

The mortgage thing makes sense (I think) Numbers. If anything it probably looks better because our mortgage is several hundred less per month than our rent was : )

I currently have 2 visas, both through banks. I also think I'm worrying too much. We won't be buying a house any time soon and our next purchase would be a car after we get mine paid off. By then we would have my car, both our student loans and probably Scott's bike paid off so we'd have more wiggle room.

SarahPLiz

Open a new one and leave the other one open but don't use it. Available credit is your friend. 

ms_teach

My brother works in finance.  As he explained it to me when I was switching banks and debating on closing my old bank credit line for the new one, this is what I learned.  Credit is all about the % you're using from what you have available combined with length of time.  It actually looks good to have credit that you aren't using, so if you close a card make sure the credit lines you do have aren't maxed out.  It's better to leave a card open with nothing on it and/or use it and pay it off each month than to close it out and not have any more available credit open.  Also, if it's a card you've carried for a long time, you don't want to close it because it will shorten your credit history. 

So, I think number 1 sounds the best if your current card is one with a lot of history.  If it isn't, it wouldn't really hurt to close it.

vegasgroom

I had several credit cards at one point that I had no idea were still open until I got a free copy of my credit report via http://www.ftc.gov/freereports Your free annual report that you're entitled to won't give you your credit score though, just keep that in mind.  So anyway, I closed them all and left open only my mastercard and an amex i haven't charged anything to in five years but that I keep around just in case; my score didn't change six months later when I had an opportunity to see it from a report my insurance company had pulled on me. 

If you're not planning to apply for something soon where your score will matter, I'd say close out the old cards, I feel more comfortable knowing even if someone came across an old number that I never used that they wouldnt' be able to use it either.

erins87

I just went to a credit seminar a few weeks ago.  You would want to go with scenario A) New card plus current.  Your credit score should not be effected by your mortgage because that is an installation credit.  Showing a revolving line (ie, credit cards) of credit with a longer history is better and having a second card will increase the total amount of revolving credit.  If you keep you revolving credit below a 30% usage it increases your credit score.

LuluP82

But the time of credit being open also makes a difference.

I'd keep them both open, at least for awhile. Just monitor your credit and make sure no one is using the old card. You can of course get the free report. You can also sign up for credit monitoring services (I do this through my AMEX card) and check on a monthly basis, and they send you alerts if something is off. I did this after someone charged stuff in my name.

Credit is weird. But having a longer (positive) history is definitely better.

It might have said too much credit because of your income vs. available credit? That definitely affects it.

katiewhompus

That could have been. When I talked to the lender guy he also said "They have to list some reason for why it isn't perfect" which also made some sense.
That makes sense about the length of credit too. I've had the card I'm keeping for 8 years now (wow that's weird to think) and the one I'm debating about I've had for 4.

hetshup

In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-boards_snarky-brides_stupid-question-credit?plckFindPostKey=Cat:Wedding%20BoardsForum:17Discussion:2ef6f640-b75f-4215-a474-9fdeaaae3b9cPost:8d8030bd-a65d-4952-aad2-3ce9a881a8e6">Re: Stupid question about credit</a>:
[QUOTE]The card I'd be closing has a $1,000 credit limit, and I would be applying for one with at least $5,000 if that makes a difference. When they ran our credit numbers for our loan it was mind boggling. I had an excellent score, but <strong>it also said too many lines of credit with 2 cards and a student loan.</strong>
Posted by katiewhompus[/QUOTE]

<div>
</div><div>Hmmm, that's odd. If you have subsidized student loans they are considered "good debt" mortgages are also considered good debt. I wouldn't close anything unless they are charging you, then since the card is so small, it probably won't hurt you that much. </div><div>
</div><div>
</div>

Birdie1483

If you keep the card you're debating on, you could always call and ask them to raise your credit limit from $1000 to $5000.

I have two major credit cards and a car loan. Last year my bank CC suddenly reduced my available credit to the point where it technically maxed me out since I had over 80% of my limit used. I was majorly piised because it affected my credit score. I recently called bank #1 back and asked them to increase my limit back to where it was before. My credit score is back to where it was.

I've debated on closing the other card, but I've had it for 4 years and it's just at that point where I can't decide if it would benefit me more to close it and open a new card with 0% APR for 12-18 months for wedding expenses, or if I should just keep it and figure out another way to pay for stuff.

katiewhompus

When I started on the card it was $500, and they said $1000 was the max they could raise it too. It also offers little to no rewards so there's not a lot of perks to using it. I'm also guessing once we ditch the bank they won't let me keep their credit card, but could be wrong on that.

katiewhompus

Yeah. I was blown away by how well we had made out. H was really really bad about paying bills on time before me, so I was dreading viewing his credit score. I've always paid my bills on time but was 25 and didn't have a huge credit history.

Blueyed228

In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-boards_snarky-brides_stupid-question-credit?plckFindPostKey=Cat:Wedding BoardsForum:17Discussion:2ef6f640-b75f-4215-a474-9fdeaaae3b9cPost:8eae385a-853f-4c1b-8a67-907b78b7feb5">Re: Stupid question about credit</a>:
[QUOTE]Your credit shouldn't be affected by the fact that you own a house.<strong><u> If you were approved for a mortgage and your mortgage is within that range having one does not affect your credit score</u></strong> (although it will limit how much credit is made available to you.) I believe that your credit score is based on how much assets you have, in relationship to liabilities, along with your history of paying bills. I don't think there is really much difference in your three situations (I use the term think because I am by no means an expert). I used to have about 4 credit cards (two mastercards, a visa and a store card). Right now I technically have 2 (my one main mastercard that has a huge limit and a store card that we got when we bought FIs wedding band. I have to remember to cancel it since clearly I don't need it). I really don't think that having one card or two will make a difference as long as you are paying them. That being said, I haven't paid a cent in CC interest in about 4 years. I use it but I pay it off every month before it accrues any interest.
Posted by number55[/QUOTE]

Thats not entirely true.  FI had perfect credit and once we got a mortgage his score went down a little bit because of it.

Credit score and loan availability is based off of debt-credit ratio.  So if you have alot of debt ( and a mortgage is a huge debt) then it will affect whether or not you can get any lines of credit for a few years.  We bought a car within a few months of buying our home and had a hard time getting a car loan, so we just put a big cash downpayment on the car.

Katie- Can you talk to a financial advisor at your bank?  I think they would be the most helpful since they know your entire situation.

LuluP82

In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-boards_snarky-brides_stupid-question-credit?plckFindPostKey=Cat:Wedding BoardsForum:17Discussion:2ef6f640-b75f-4215-a474-9fdeaaae3b9cPost:ea51b112-2e74-45e7-b822-f8682856e189">Re: Stupid question about credit</a>:
[QUOTE]In Response to Re: Stupid question about credit : Thats not entirely true.  FI had perfect credit and once we got a mortgage his score went down a little bit because of it. Credit score and loan availability is based off of debt-credit ratio.  So if you have alot of debt ( and a mortgage is a huge debt) then it will affect whether or not you can get any lines of credit for a few years.  We bought a car within a few months of buying our home and had a hard time getting a car loan, so we just put a big cash downpayment on the car. <strong>Katie- Can you talk to a financial advisor at your bank?  I think they would be the most helpful since they know your entire situation.
</strong>Posted by Blueyed228[/QUOTE]

This-- or, since I think your H is a Marine from your pics-- try base. I know they have some financial literacy classes, since I've been asked to teach a couple (I'm certified to teach those through previous volunteer experience...I just don't have time). It's hard to give advice without actually looking at the paperwork. Just watch out for the Marine Credit Union-- they gave us really shady advice.

Celles

Option A.

I'm a corporate credit manager now, but I was a consumer credit analyst for Citi for years.  This is what I do. 

Lenore2010

I never close accounts. Sometimes I go and charge something small just to keep an account open. Once I figured that out, my score went from 700 to past 800 because my ratio is always good.

Mortgage lenders vary widely in how they view student loans. Government loans are seen differently from private loans (because the terms are completely different-like being able to get forbearances and deferments vs. NOT on private loans) by most lenders. Some take the view that debt is debt and they don't want you to have any of it. Others could not care less if you have 100K in government loans as long as you have the income to support your payments, but will freak if you are not paying your credit cards off in full each month regardless of income to debt ratio. I would say shop carefully if you are looking for a mortgage. It can make a huge difference in you rate.

*BeachBride0410*

All I can think of is Dave Ramsey & he would say no to credit cards.....but not everyone can do that understandably. 

Sorry I have no knowledge on this subject, but it was interesting reading everything.

pirategal03

I think myfico.com has an analyzer where you can submit different scenarios and see how they would affect your score.

But I'd keep the card open.  I think 5 years is the magic length of time for a "credit history" to be established, and you're almost there for that card.