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     | Wednesday, February 14, 2001 - 01:49 pm  Christine recoomends keeping any credit card account you no longer wish to use, open. I her reason for doing so had to do with keeping your available credit limit high. Now, I understand her argument, but how can we be sure that it is more beneficial this way?? There is a reson code that says you have too much available credit. This tells me that it can be a reason for being denied credit (and hence having a lower score). Can anyone substantiate Christine's claim. I'm just sceptical. -Dan
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| | Wednesday, February 14, 2001 - 02:04 pm If you are referring to: "Amount of credit available on revolving accounts" (NextGen Reason Code - A2). That is a reason code that isn't given under the 'classic' FICO scores which is what Christine's advice is based on. Also if average age of a credit account and oldest credit account are factors that would be a reason to leave the cards open.
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| | Wednesday, February 14, 2001 - 02:18 pm To Diverge for a second... would it be best to get rid of low limit CC's. Say if you have one card with a $300 and 3 others with at least $2500. The $300 card is older than the others(that company is slow in increases). Should one crap the $300 card for FICO reasons?
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| | Wednesday, February 14, 2001 - 02:46 pm I don't really know but my theory has been it's the total of all your card balances compared to the total of all your card limits so if that's true then the $300 limit isn't making you look bad.
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| | Wednesday, February 14, 2001 - 03:05 pm First let's point out that the NextGen "A2" code doesn't specifically say "Amount of credit available on revolving accounts is too much" -- the code might very well be used where the amount available is too small. I am not aware of any adverse action reason that has to do with too much available credit.
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| | Wednesday, February 14, 2001 - 05:47 pm Dan, there are MANY more reasons than the debt/limit ratio. An excerpt from Increasing your Credit Scores "A few reasons for MANY credit line/card accounts: a) If you only have a few accounts, and ONE bank screws up and you DISPUTE the derogatory info, they'll often just delete the entire account. BINGO! You just lost 5 years of excellent account history. No big deal if you got another 8 accounts, but it will lower your scores if you only got 2 other accounts. b) Your bank STOPS reporting to the credit bureaus. Either entirely, or they stop reporting the credit limit as Citibank and Capital One do now. Again, no big deal if you got MANY accounts. A HUGE problem if you got only 2 or 3 accounts. c) Your bank changes rates/terms. NO PROBLEM, as long as you got other accounts to use. d) YOU screw up and end up with a late payment on your credit. FICO credit scoring will deduct MORE points for that one late if you only have a few accounts. MANUAL underwriting will also rate a single late different if you have many current (not CLOSED) good accounts. e) When you have many premium (good credit) credit cards, you can take advantage of special promotions, cash back, discounts, etc. f) "Something" happens and you're short on cash. There is NOTHING like having access to $50K or $100K when you need it. The way the banking system works they obviously DON'T give you new credit lines when you call and request credit to pay for your bypass surgery or your mom's cancer treatment. Example: It's highly unlikely that anyone will give you as little as $10K for any reason if your existing available credit is under $10K. Having those accounts you never needed could save your or a loved one's life. Aside from saving someone's life, large amounts of available credit can save your credit rating and most certainly a lot of cash. Unforseen emergencies happen all the time. When you have a lot of credit available, it's very INEXPENSIVE to borrow. Your rates are low, you get free balance transfers, etc. etc. All those freebies and low rates disappear instantly as you NEED more credit. The more ESTABLISHED credit you have, the more offers you'll get. Once again, the key is HISTORY. And it helps to use each card at least once a year to show activity. Fill up your car, then pay the balance in full. I can't remember the last time I recommended that someone close credit lines/cards OTHER than finance company accounts. You can NOT have too much ESTABLISHED credit and closing a free credit line/card account with several years history is almost always a bad move. I hope it is obvious to everybody that the "close accounts you don't need" advice benefits only the lenders." I just remembered another reason: many banks only report to 1 or 2 of the CRAs. Since your scores are based on only ONE report, you need to make sure you got sufficient reported accounts. I'm addressing the debt/limit ratio in another section, should probably mention it here too. And, there are about 9,000 postings at the 2 BayHouse forums. How many people complained about being declined for too MUCH credit or too MANY accounts?
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| | Wednesday, February 14, 2001 - 06:04 pm Forgot to mention that I HAVE been declined for too much available credit. I think it was in the late 80's, and I probably had gotten 30 or 40K in new credit cards in a year or so. Out of the 4 reason provided, the available credit was the only factor I could immediately change. So I promptly closed a bunch of accounts, which really caused a lot more severe problems. And it was a mistake I could not undo. People get too caught up with individual scoring factors. Sure, they're interesting, but not NEARLY as important as looking at the ENTIRE reports and the resulting scores. I expect that account HISTORY will remain the most important factor for the NextGen scores. ONE account impacts on possibly 10 or more codes. There is NOTHING you can do to create history other than have the accounts for a LONG time.
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| | Thursday, February 15, 2001 - 07:27 am I have a question, you talk about current, open accounts a lot here. If I have 20 items listed on my credit report and only 4 or 5 of them reflect open, current accounts is this worse than having 10 or 11 of them open and current? A good tradeline that is closed is not as helpful as a good tradline that is open?
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| | Thursday, February 15, 2001 - 11:21 am Yes. It still is positive to show the closed accounts with good payment history, but the longer they've been closed, the lower the impact.
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