When I was 18 (21 now) I went credit card crazy, basically trying to "collect" credit cards lol. Well that went wrong early and I over spent myself quickly. I am now attempting to get on the right track. I currently have about 5 credit cards, 7 department credit cards. My curent balance/limit ratio is 49% and I owe about 7k on credit. I have decent interest rates, about 2k of this debt is on furniture that has no interest for 4 years, and 1500 is interest free. My other rates range from 7-15% apr... I recently went and transfered some balances to a new credit card with no interest for a year to get those paid off. I have 8 cards that have no balance on them, of which I use about 3 of them. My curent credit score is about 660 and soon would like to buy a house in about a year once i get out of school. I would like my score to get above 720 in the mean time. I know paying off my cards will boost up my score the most, but what other measures can I take in order to help out my credit score. What effect does closing out cards have on credit score. I recently applied for a discover to transfer the rest of my higher interest cards to a lower one and it said I should close out any unused cards... What type of measures can I take to boost my credit score up above the 720 range within a year? Thanks for all your help!
Been there, done that, and I know for a fact that closing old, positive cards can hurt yer score. And bad! I know everybody's reports are different, but I'd be careful about closing old stuff, and specially if it's the oldest cards on yer report. I'm glad to see you're on a good road with ya credit
You want to maximize your average age of open accounts and minimize your utilization on revolving credit. Closing older cards will hurt both. My advice is to take out new cards when you can get 0% with no or small fees, transfer the interest bearing balances to them, pay them off, and then close the newer cards when you are ready to get a mortgage. They will probably bribe you to get new cards after you buy your house, so any cards you close should be replaceable. Subscribe to MyFICO for a few months when you are shopping for homes, but you will probably be best off with a bag of groceries or a tank of gas on each card every month. Oh, and ask for credit limit increases every 6 months to a year. Large limits lower utilization percentage and make you look more creditworthy. Who wants to loan $200k to a guy who can only get $300 credit cards?
"I recently applied for a discover to transfer the rest of my higher interest cards to a lower one and it said I should close out any unused cards..." Useless, selfserving "advice". Keep old accounts open, since length of credit history is a factor in FICO. Phase out accounts with annual or other onerous fees at your convenience, once you have replaced them with accounts with better terms.
Credit reporting means banks want you because other banks want you, and banks take advantage of you because other banks are taking advantage of you. It is the rule of the lemmings.
