I have about 7 credit cards in my name that show up on my credit report... All of them have a $0 balance except for 1 which is my Navy Federal rewards credit card. I charge almost everything to this card and then pay it off in FULL before the end of the billing cycle. The other 6 cards I don't really use, ever. Now I know that I shouldn't close them because some of them are old... but should I be using each card once a month just to keep them active? I know this probably is an amateur question but I've heard a couple of different viewpoints on this... One is don't use them if you don't need to, and the other is that you should use them so they keep reporting your payments. Although on my credit report they are all green/'ok' even in the months where I didn't make a payment because I had a zero balance. I don't know if using them more would boost my score... currently scores are TU 754, EX 726 (there's an error on this one that I've disputed), and EQ 763. The only negatives I have on my report is 1 payment that was 30 days late back in 2008 when I totally forgot I had used the card. Duh! Totally my fault. I think my scores are a little low because primarily I only have credit cards on there. I had a car loan that I paid off and closed about a year ago. There just isn't much variation in types of accounts on my report because there is no need for them. I don't need to buy a car anytime soon, although we are hoping to purchase a home at the end of the year. Any other tips on how to boost? Thanks y'all!
Having some recent activity on your credit cards is going to actually improve your score. Having the credit cards on your credit report is helping your credit if you have had the cards for a long time. So you are correct not to close them even if you don't really use them. I would charge some gas or lunch on them and then pay them off in full so you don't pay interest on any of your purchases. You will see an improvement in your credit score with your recent activity on your credit cards. Thanks! Heather with BoostMyScore.NET
jmc - not an amateur question at all. Heather's correct in that recent activity on your cards WILL give your score a boost. Every time you make a payment, that payment is reported to the major bureaus. Even if it's a $10 purchase, making that payment will contribute to an improved credit score. If you spread out your purchases a little more, it will improve the number of payments you make each month and thus build your credit profile and score. I wouldn't worry too much about diversifying your accounts if you plan to buy a home in the near future; I would just focus on improving your payment history since this is literally the number one factor when determining your FICO score.
Thanks Jason and Heather! I will definitely take your advice and see it if makes a difference. I pull scores every day so hopefully will be able to see a difference
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First off I agree, don't close those old accounts as they provide a boost in terms of credit history. Also it is a good thing to occasionally use your cards for a couple reasons. First, you want to make sure that the credit card issuer doesn't close your accounts for inactivity. Also as the others stated some occasional use and payments on the card can help with your score assuming the creditor is reporting the activity. But, in my opinion you should narrow it down to a couple go to cards that you use on the most regular basis and pay the balances off at the end of the month. John Ulzheimer, credit expert for Mint.com wrote a good article on this exact question which you can check out by searching the Mint blog for "How Credit Card Inactivity Impacts Your Credit Scores". I would link it but I'm a newbie to this forum and don't want to break the rules.
Well I guess I answered my own question here... Used my Discover card a few weeks ago and I haven't used it in about a year... Only charged $140 on it and left it to see what would happen... My FICO score dropped from 764 to 759. Here was the explanation on the alert I received: "This alert was sent because there is new activity on an account that was inactive for more than months. How newly active accounts impact your score: You received this alert because one of your credit accounts is showing activity after having been inactive for some time. The effect this has on your FICO® score is hard to predict; it may cause your score to go up or go down. This kind of alert often happens at the same time as other alerts on the same account. The other alert, perhaps a balance increase alert or an account change alert, likely has a greater effect on your FICO® score. However, it is possible for new activity on an inactive account, by itself, to affect your FICO® score. Your FICO® score may go up if most of the accounts listed in your credit report have been inactive recently and then new activity is reported on one of the accounts. Consumers who have recently used credit responsibly often have higher FICO® scores than consumers who have not used credit at all recently. Therefore, showing new account activity on your credit report that previously had little recent activity can help your FICO® score. Your FICO® score may go down if the new activity is reported on an account that was already in bad status. Accounts in bad status include those that are currently past due, have a history of missed payments, or are charged-off or sold to a collection agency." Weird the Discover account isn't in bad status, It's perfectly clean since I opened it!
Here's the aforementioned article Creditnerd talked about - some good tips in here: MintLife Blog | Personal Finance News & Advice | How Credit Card Inactivity Impacts Your Credit Scores
Thanks Jason!! Hopefully it will go back up once I start using the cards. Funny since that didn't happen on my CapitalOne card and I stopped using them both at the same time.
No problemo. I think your best bet is to use the card and pay it back in full rather than carry a balance. FICO has said that carrying a small balance may have a positive impact on your score: "In some cases, having a very small balance without missing a payment shows that you have managed credit responsibly, and may be slightly better than carrying no balance at all" ... Quote courtesy of Ask an Expert: Will Carrying a Balance Improve My Credit Score? | Money Talks News ... But my advice it to use your card monthly and shed the monthly balance at every opportunity you can.
So many decisions!! I think I am just going to stop using those 2 cards... Because using them doesn't help my score (it hurts it) and it's more of a burden to remember that I used it and to pay it off, I wouldn't want to miss a payment. I'll most likely stick with my Navy Fed rewards card, I put everything on that and pay it off every month, I have a 25k limit on it which they keep increasing and I haven't paid a dime of interest since I got the card a year ago. The rewards are awesome too. If Discover or CapitalOne closes my account, I don't really care because I only have $1,000 credit limit with them so I don't think that would really make a difference in my utilization. CapitalOne is my oldest account though so I'll try to keep that one active! Thanks Jason!
Another factor is keeping low utilization on those cards. I discovered the hard way that debt utilization affects credit scoring. This is the ratio of what you owe versus the available credit limits. I had high balances on positive accounts, and it greatly affected my FICO score. A MyFICO rep told me 7% was a good utilization percentage.
kparker, Thanks! I keep a $0 balance on all of my credit cards except for 1, so my overall utilization fluctuates between 0-5%, still no difference in score when I carry a balance vs. no balance, I think it really only matters if you have over 7% utility
I have heard that keeping your balances on your credit cards between 1% to 9% of the credit limit will benefit your credit score the most. Also using your credit cards every month helps as well. Thanks! Heather with BoostMyScore.NET
