What do you think I should do??

iVillage Member
Registered: 03-20-2004
What do you think I should do??
6
Wed, 03-16-2005 - 12:25pm

At the end of this month I will be offically out of CC debt. I have the money to pay everything off (plus 3K left over), I'm just waiting for the bills to come. YIPEEE!!!!!

I did plan on cancelling all my cards and never using credit again, but I know I'll never be able to buy a car or a house without a current credit history.

I'm a little confused about what to do next....I currently have 7 CC's.... Macy's, Express, Victoria's Secret, Best Buy, Visa#1, Visa#2, and a Mastercard....all are cut up except the Mastercard (they just sent me a new one)...

I want to clean up my accounts. I want to get rid of the store cards, except Best Buy because they do have promotional 0% financing, but I'll only use it if I know I'll pay it off before the interest rate spikes up to 19%. I've had all my CC's since 1999, except for Best Buy, which I got in 2003. Since I got the Visa's and Mastercard when I was 18 the interest rates are pretty high. My credit limits are 2800$ on Visa#1 (20% interest), 2050$ on Visa#2 (17% interest) and 800$ on Mastercard (13% interest). I can't get them to go any lower because they are considered student accounts.

I get tons of junk mail for new CC's with much lower rates. One from Chase had 0% until 8/1/06 and 7.99%APR after that. I was thinking of cancelling either one or both of my Visa's and possibly the Mastercard and replacing them with a CC that has lower interest. I have a long and pretty decent credit history with all of my cards, and I've heard that accepting new credit and closing old accounts is bad for your credit score. I'm not sure which I should close and what I should keep open.

Also is it better for your credit score to pay a CC off every month, or keep a small revolving balance to keep you credit history current??

I'm thinking buying a house in the next couple years, and I want to have really good credit....

iVillage Member
Registered: 02-19-2004
Wed, 03-16-2005 - 12:40pm
If I were you, I would keep them all open but I would not use them all (closing accounts reduces your available credit which can hurt your score). I would only use the MC at 13% for purchases, since that is the best rate you have (just in case you do ever carry a balance for a month or two). You don't need to open a new card with a better rate because you don't need to be carrying a credit card balance. Use your MC occasionally and always pay it off as soon as you get the bill. You can use it for gas for your car (usually a relatively predictable monthly expense) or have something like your monthly gym membership charged to your card automatically, and then pay it when the credit card bill comes. This way you will be maintaining current credit activity on *one* of your oldest cards and you won't be paying any interest charges either.

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iVillage Member
Registered: 03-27-2003
Wed, 03-16-2005 - 1:08pm
I agree with the other poster that closing the accounts may lower your credit score. I would probably check my Suze Orman books first, because I know she covers this issue. I know you should keep the accounts with the longest credit history. Newer accounts and store cards may be easier to close without causing a big drop in your credit score.
Also, you might want to take into account if you have the will power to stop using the credit cards. For me, its kind of like having Oreos in the house.
Hope this helps
iVillage Member
Registered: 02-19-2004
Wed, 03-16-2005 - 1:19pm

>>>For me, its kind of like having Oreos in the house.<<<

Good point! One way to overcome this is not have the cards and not use them for purchases. You can set it up so your gym membership (or something like that) is charged to the card automatically, and always pay the card every month, without actually having the card in your posession. I have my daycare charged to my credit card every month. I do this because I get a discount if they have a card to auto-deduct the payment from, and it's due the 25th of the month (a few days before rent is also do, and they are both right about $1,000 per month so I can't pay them out of the same paycheck). I pay my rent on the 1st and then pay the credit card (daycare charge) off around the 15th. I pay online on the credit card website so it's actually paid before the bill is issued and I never pay interest charges for it. I don't need the card to do this, but it doesn't make a difference on my credit report - my credit report shows paid as agreed each month and my high balance, which is around $10k and my limit, which is around $15k. I openned the card in 1990, and it is definitely my oldest card :)

Another way to get around this is to not keep the cards in the house. Have a family member keep them. Usually you only need to use the cards once per year to keep them active and show a history.

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iVillage Member
Registered: 03-20-2004
Wed, 03-16-2005 - 2:53pm

Thanks for your replies. I don't think I'll have a problem not using them. I don't want to go through getting out of debt all over again. All but one are cut up anyway, and that one isn't even activated. I could just use my MC to buy gas or something, and just pay it off as soon as the bill comes. Eventually I'll see if I can get replacments for the ones I cut up and just use them once or twice a year and pay them off. If I leave them home, in a place that's hard to get to, like in my attic or under my matteress, I'll be less inclined to use them.

I was just wondering if it's possible to have too much avaiable credit in the eyes of creditors. I have about $10K in availabe credit. Is that too much??

iVillage Member
Registered: 02-19-2004
Wed, 03-16-2005 - 6:39pm

I am no expert, but I can't imagine *any* creditor thinking $10,000 available credit is too much. I have about $35k available myself (I owe around $6k on one credit card, total limits between 5 cards is around $41k and the most I have ever owed was around $20k). The only time I have ever heard of a lender even caring is when you are getting a mortgage, and I highly doubt a mortgage lender would think $10k is too much. My plan is if when I go to buy a house next year and they think I have too much available, I'll call up and close a couple of my cards at that time. I have never heard of having a lot of available credit mattering one bit when getting a car loan or opening other credit accounts, only when getting a mortgage.

We'll see if anyone disagrees with me. You might also want to ask on the Debt Q&A board.

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Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Thu, 03-17-2005 - 2:53am

If it were me, I would dump all of the store cards (maybe except BB for the reasons you mentioned).

All my best,
Danni