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Old 08-24-2007, 09:20 AM   #11
Join Date: Aug 2007
Location: Dania Beach, Florida
Posts: 77
Originally Posted by GB View Post
This is not really true. I used to work at a bank and one of the things I dealt with a lot was credit cards and loan approvals. Low utilization will hurt your score. Carrying a balance, while making minimum payments is what helps.

I worked for a VERY large bank and I was one of two people who had the job of calling "good" credit card holders who had written in to cancel their cards. By "good" customers I mean customers who carried a balance and payed the minimum payment. That is how the bank makes money. We could care less about the customer who charges $10,000, but then pays it off right away.

I would offer lower rates or other things to keep our "good" customers, but I HAD to cancel it if they really wanted to cancel it. Just call the card company and say you don't want any special offers, just cancel the card. If you tell them you are in the process of getting a mortgage and the loan officer said you have to cancel the card before you are approved then that will do the trick right away too.
Obviously the bank makes money by those who only pay the minimum due. Obviously a bank doesnt care anything about a person who pays off an entire account without forking over interest and fee's. They prey on the people who pay thru their nose in interest for life. Thats the kind of card holder they seek out and want to keep. What Im talking about is not what benefits a bank or any other creditor. Im conidering the best interest of the DEBTOR... the card holder. In this case we are discussing the best interest of the original posters situation (not the banks) if they cancel their card. You can do simple research online to see what the experts like Suze Orman recommend or you can contact FICO (Fair Isaac Corportation), or any of the four credit bureaus(Experian, TranUsnion, Equifax, Innovis) themselves to see that aged credit, whether used or not, is what builds a strong credit score. It goes without saying that aged credit shows a "continuing history" of the creditors ability to control their debt wisely. If you cancel a card you are eliminating that contributing factor to a higher FICO score. The higher your FICO score is.... the less interest you pay when you apply for credit.

Fortunately, in these current times the public is becoming more educated in the importance of their credit score. We are seeing commercials left and right for free credit reports so consumers can finally become credit saavy and control their own financial destiny. They are also becoming more aware of the practices of credit card companies to leech the most in interest and fee's out of them, too. Card holders are also learning how to use their card usage to breath life into their scores by paying MORE than the minimum (I didnt say pay it off) to keep their balances down and minimize interest.

Of course..... we can also concider whether or not the original poster will even be in the position to need to apply for a mortgage or auto loan. Their FICO score may not be important to them if they wont be in the position of shopping for a better interest rate on a loan. If this is the case, if they wont be in need of a loan, then it wont matter if their FICO takes a hit.

See also http://http://credit.about.com/od/to...closecards.htm


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Old 08-24-2007, 09:25 AM   #12
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Location: USA,Massachusetts
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DaniaBchGirl I am not disagreeing with you about aged credit. I am disagreeing about aged credit with low utilization. Your score does not improve anywhere near as much as it does if you constantly use the card.

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Old 08-24-2007, 09:42 AM   #13
Join Date: Aug 2007
Location: Dania Beach, Florida
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Originally Posted by GB View Post
DaniaBchGirl I am not disagreeing with you about aged credit. I am disagreeing about aged credit with low utilization. Your score does not improve anywhere near as much as it does if you constantly use the card.
The original post is about cancelling a card... if its good or bad. So that is what I am trying to focus on. Any other details I used were to help in the understanding that there are several factors involved in good credit usage. What I mean by "Low Utilization" has nothing to do with the frequency of use. "Low Utilization" in credit terms relates to the percentage of debt a person carries. Low utilization means to keep your BALANCES below 30% of your available credit.

Credit-utilization ratio is key
First, canceling a card could upset your credit-utilization ratio, the second most heavily weighted category in Fair Isaac's credit scoring algorithms. For example, assume you have three cards with total available credit of $20,000. Assume further that your outstanding balances total no more than $6,000 of that available credit at any one time. Since creditors like to see a credit-utilization ratio of 30 percent to 35 percent or less, you're in good shape. Now, assume that you cancel a card with a zero balance and a $10,000 credit limit. Suddenly, your utilization ratio jumps to 60 percent, and your credit score drops.

Furthermore, he says, canceling that card could result in a double whammy to your credit score, "because each card is scored individually, and then all your cards are scored together. (If) you've just canceled the card with a zero balance, (you've) lost a great individual score." Regardless, if you still want to cancel a card, he says, "make sure to pay down your other balances to keep that rate in line."

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