Credit cards and credit question

I own two Visa credit cards which I use and two more which I accepted to get special in store discounts but never used except for that one time purchase on each and currently have no balance on them. Does holding on to these credit cards without using them affect my credit either positive or negative?

When I got a home mortgage in 1994 (which we have subsequently paid off ), I recall that the lender regarded the credit card as a "ding", since I could theoretically go max out the card and have that debt competing with my mortgage for my disposable income. If that makes sense. Don't know if it affects your credit score.

It wouldn't hurt to cancel those unused credit cards anyway.

I think that one's credit score should be zero anyway, as a credit score is an "I love debt" score. You can get home mortgages and other loans even with a zero credit score if the lender does manual underwriting (i.e., actually looking at your cash flow rather than just relying on the credit score).

cheers

powernoodle said:

I recall that the lender regarded the credit card as a "ding", since I could theoretically go max out the card and have that debt competing with my mortgage for my disposable income. If that makes sense. Don't know if it affects your credit score.

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True, but when I purchased a car years ago they also look for the ideal profile as having about two credit cards. Since I don't have any credit cards (by choice) that was a "ding" against me. Go figure.

It's better to leave the credit cards you have open, and use them once in awhile. Make sure you keep them paid off. Creditors look at yourn profile having credit and how you control your finances.

geepondy said:

I own two Visa credit cards which I use and two more which I accepted to get special in store discounts but never used except for that one time purchase on each and currently have no balance on them. Does holding on to these credit cards without using them affect my credit either positive or negative?

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your visa payment history can help you or hurt, depending upon how you've taken care of your payments.

visa/mc cards with zero balances are an excellent indicator. this means that person has had access to $XXX (depending on credit line) at a moments notice and has not abused it.

payment history contains high balance, number of payment over 30day, how long account was active, etc.

to actively improve your credit history. you need to watch all above categories.

for instance...

1. to improve high balance. do a calculated transfer of funds from visa (hopefully with promotional zero or very low interest) into your checking account. then ear mark those funds and don't spend it. then proceed to pay back visa in 3-6 months. longer the better, match your payback with promotional discount rates. exact same tactic can be done with a bank loan. only you need to deposit funds to secure note.

2. Don't cancel your credit cards, do negotiate a lower rate. keeping your credit card open will help establish good length of credit portion. don't have too many credit cards open at same time. I've seen folks with 50+ visa/mc. I'd keep it down to 2-3 max unless you have a specific reason to need that card. then keep zero balances after improving your high balance as noted above.

geepondy said:

I own two Visa credit cards which I use and two more which I accepted to get special in store discounts but never used except for that one time purchase on each and currently have no balance on them. Does holding on to these credit cards without using them affect my credit either positive or negative?

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You are best off keeping them with zero balances, as it shows you are good at managing available credit. If a future lender "dings" you for it, you can always close them then.

It depends on if you will be applying for a loan or mortgage.
The max credit limit of each card is factored in negatively in calculating your interest rate. In other words, your cards indicate your possible debt load should you max them out. And they take this into consideration whether you can make your loan payment. The more cards you have, the worst prospect you are as a loan applier. The higher your rates and fees.

So, if you aren't using your extra cards, dump them before any mortgage application.
When you cancel the cards, always request from the company a written statement mailed from them indicating that you requested the closure of said account on such date. This is your record as to why the cards were closed, in case creditors look unkindly to lost of cards. If you cancel a card, it doesn't always indicate in your records why it happened, and credit reporters can look at it as the bank canceled you.

Most credit/financial folks say that when applying for a home loan that lines of credit, esp LARGE lines ($10,000 or more) with a zero balance is definately a bad thing. And to have even a $2,000 'emergency' credit card which has a zero balance and is never used isn't a good thing either.

I'm going through Dave Ramsey's class and he is very much against using credit for ANYTHING except the home... having said that, my father in law gets a brand new F150 every three years or so. The last two of the last three trucks he got, he was financed for 0% at 60 months. The last one he got, he had recently retired and was offered something like 4.2%. As much as I am against putting things like TVs and vacations on credit cards, if you don't have any credit cards and you've never paid off a line of credit, there's no way you'll be approved for a 0% 60 month loan. Anyone with a lick of common sense will tell you if you are approved for a 0% 60 month loan, do it. Then put what you would have put in interest into an investment... A 0% 60 month loan is actually cheaper than paying cash for the same truck.

cratz2 said:

A 0% 60 month loan is actually cheaper than paying cash for the same truck.

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That is true for any rate below the rate of inflation. 0% is ideal, it actually amounts to them paying you to borrow, when inflation is accounted for.

lowbat said:

when I purchased a car years ago they also look for the ideal profile as having about two credit cards. Since I don't have any credit cards (by choice) that was a "ding" against me. Go figure.

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It doesn't matter; they'll use that as an excuse to jack up the rate, but car dealers would finance Hitler to sell him a car. :devil:

When I first moved to Vegas from Canada, I was an adult with zero credit history in the U.S. (except for big institutional/transnational lenders, credit history in another country doesn't count for much in the States). I couldn't get a credit card for about a year, but I got a car financed the first week.

I've found its better to have some credit cards rather then none or too many. I've consolidated all my accounts down to two banks so I have checking, savings and credit with them. Closed out all those other cards. This makes it easy for me to check/pay all my accounts since I don't have to have 20 different places but its also raised my credit score. Your also better off carrying a small balance, under %20 so even though your paying a little interest on that balance you kind of buying better credit with it. So I'll make one purchase like the $150 hdd for my laptop then pay $50 a month until its paid off then buy something else I want/need on the card.

Eugene said:

I've found its better to have some credit cards rather then none or too many. I've consolidated all my accounts down to two banks so I have checking, savings and credit with them. Closed out all those other cards. This makes it easy for me to check/pay all my accounts since I don't have to have 20 different places but its also raised my credit score. Your also better off carrying a small balance, under %20 so even though your paying a little interest on that balance you kind of buying better credit with it. So I'll make one purchase like the $150 hdd for my laptop then pay $50 a month until its paid off then buy something else I want/need on the card.

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Exactly! Other than those that live by the mantra 'no credit cards EVER', this is the advice I hear most often from professionals.

I've tried it all. I've had a lot on credit and had an average credit score, had nothing on credit and had a bit above average score then had a little bit on credit and have an good score.

I think it also depends upon your income. They go on a debt RATIO so half a dozen open CC's could be GOOD for one person and BAD for another. Couple that with your credit HISTORY and you get a much clearer picture.

I had truly excellent credit before I bought my condo with no debts at all. Two and a half years ago, I was forced to put $5k on one low interest credit card to pay for a roofing assessment. I pay between $125-175 each month on it and am down to just over a grand and hope to pay it off before the end of the year. The other used credit card, I pay off each month whatever I put on it. I haven't checked my credit rating, haven't had a need to, but I hope putting $5k on the credit card did not hurt it substantially.

I would also recommend that EVERYONE check their credit history periodically. You can get it free now once a year from each of the big three reporting agencies. It will just be your credit history, which is somewhat cryptic in format. But it is free. If you don't mind spending a little money, you can get your credit score also.

When we have checked ours over the years, there have been mistakes on it. Either accounts we have closed showing up as the bank closing them. Or we even had a credit card that was listed as negatively closed that was dated four years before my wife was even born.

Your credit score can save or cost you a lot of money over a lifetime. We usually spend a lot more time checking 401k balances and other investments than we ever do checking our credit history. And for some people, differences in interest rates you are charged for loans can amount to a lot of money.