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Serious Question on Credit Profile

Discussion in 'Other Off Topic Forum' started by ghost, Jan 13, 2005.

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  1. ghost

    ghost F1 World Champ
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    #1 ghost, Jan 13, 2005
    I generally try to manage my credit profile fairly conservatively, given that I know how much depends on that one little thing they call the FICO score. The one question I did have was this:

    I've had a "backup" VISA credit card for about six years now. I rarely use it, and when I do, the bills are automatically paid on time. I am thinking about a purchase from Amazon in the $100's of dollars (lots of books that I had put in my cart and now seek to buy). Amazon is currently offering you a meaningful discount if, at the time of purchase, you sign up for their Platinum VISA card. I'm therefore thinking about closing out my existing backup card, and signing up for the Amazon Platinum Visa.

    I've read the stories on how you should avoid excessive rotating in and out of cards, as it portrays a negative pattern, but I assume periodically changing cards will have little effect. What I DO have a question on is whether the fact that I've had a credit history with the backup card (limited as it may be given lack of use) is an important enough factor to keep the backup card and forego the savings from the Amazon card.

    At the end of the day, the $'s saved through the Amazon card are nothing to write home about, but if there is little effect from swapping cards, than why not go ahead and benefit?
     
  2. MikeZ_NJ

    MikeZ_NJ Formula 3

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    #2 MikeZ_NJ, Jan 13, 2005
    I'm not a financial planner, so take this at face value. I've done a ton of research in the area of credit scores for my own personal edification, and personally, my scores have gone up a great deal from this knowledge.

    Without knowing your personal circumstances (age, credit history, etc) I'd generally say that you should just go ahead and open the new card but DON'T close the other one. Keeping a card open *can* have a positive effect on your credit, and no effect at worst. Closing a card *can* have a negative effect at worst. It's almost always better to keep the account open.

    Some forums you might be interested in:
    http://www.creditnet.com/
    http://www.fatwallet.com/c/52/
    (particularly: http://www.fatwallet.com/forums/messageview.cfm?catid=52&threadid=158558 )
     
  3. ghost

    ghost F1 World Champ
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    #3 ghost, Jan 13, 2005
    Thanks very much for responding Mike. I'll go ahead and check out the forums you noted shortly. I am a little surprised on your comment about additional credit cards NOT having an effect - my general understanding is that ceterus paribus, the more cards you had, the more your credit risk increased (becaused of the ability to lever up with more debt), and consequently, the more your credit score was impacted in a negative sense. Perhaps reading some of these links will inform me otherwise.

    By way of background, I've got an extremely high credit score, due to a relatively clean credit profile. I'd just like to keep it that way.

    Thx.
     
  4. MikeZ_NJ

    MikeZ_NJ Formula 3

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    #4 MikeZ_NJ, Jan 13, 2005
    It's really a delicate balance that no one knows the science behind, so there's not one "correct" answer. Sure, too many cards could potentially be detremental, but how many cards are too many? Have you opened any cards recently? Opening multiple cards in short intervals looks much worse than having multiple older cards which lengthen your pristine credit history.

    What you might consider checking is whether the card you're applying for does a hard or soft credit check on you. A soft check won't adversely affect your score - a hard check most definitely will.

    Opening a new card might drop you some points, but those points will rebound quickly. Given your good credit, I wouldn't think there'd be much of an issue. To counter-balance opening the new card, why not ask for a credit line increase on the older card? The subsequent higher available credit should make the FICO gods smile upon you, as you are carrying no balance and are most likely getting a credit line increase because you're a good customer!


     
  5. Schatten

    Schatten F1 World Champ
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    #5 Schatten, Jan 13, 2005
    agreed, closing the other card would be a bad bad thing.

    opening new cards, new lines of credit is a good thing, even if they are rarely used. they are open, use them as you can to rotate some dollars.

    the magic number is... five. five credit cards. but of course, there are people with shining high FICO scores with only three.
     
  6. ghost

    ghost F1 World Champ
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    #6 ghost, Jan 13, 2005
    Appreciate the thoughts guys.
     
  7. PeterS

    PeterS Five Time F1 World Champ
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    #7 PeterS, Jan 13, 2005
    I keep the total open value of my credits card at 15% of my adjusted income and pay each card off each month. Banks look hard at the amount of outstanding revolving credit in determining credit scores while they could almost care less about auto or home loans that appear on your credit report.

    You should treat all of your credit cards like an AMX card where you have to pay the balance each month (Stay away from 'Sign & Travel'). The higher your credit card debt, the lower your scores will be. Credit cards are evil!
     
  8. ghost

    ghost F1 World Champ
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    #8 ghost, Jan 13, 2005
    With you on this Peter - I pay off all balances on all cards (really just on my primary card, as the second card in question is a backup card). My point was to query whether the addition of another card - regardless of whether I have any balance on it or not - would be deemed a negative.
     

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