I have a Beneficial account at 27%apr, a Providian account at 15% and a CapitalOne account at 15%. I applied for a Washington Mutual card for 0% for 12 months to combine those first three cards to pay them off in a 12 month plan. I have had my Capitalone card for 8+ years and Beneficial & Providian less than one year. How would this affect my credit score if i would combine those three cards onto one. and what would be best to do with the other three cards? should i close them or would it make my credit weaker or stronger by keeping them open? Any suggestions or advice would be appreciated. Thank you! DiannaWV
If the cards have no annual or monthly fees when not used, just leave them open for the time being. Closing them just increases your debt to available credit ratio, which will affect FICO. As long as you don't close accounts, your transfer over to a new account will probably only slightly drop FICO in the near term due to the inquiry, but it should bounce back as the new account ages, and as long as your total debt does not increase, your debt to available credit will have improved. The Beneficial card is likely to be history soon, since it is not your oldest card, the rate is exorbitant at 27%, and the company has a history of predatory lending. You want to establish credit relationships on better terms. After you have established other accounts with sufficient credit limits that closing the Beneficial card has little effect on your total available credit, you can close it, but insist that they notify the CRAs that it is closed (required under FCRA if you ask), and that they send you a letter confirming that it is closed. As with any closed account, keep a copy of your letter requesting it be closed, along with their acknowledgement, and your final 0 balance statement in your records. Cap One is your oldest account, and the rate is not too bad. Maintain it open as a long credit history anchor for your FICO score, using it occasionally to maintain some activity even if you don't carry any balances. Since WAMU has bought Providian, I don't know whether these two accounts are going to be handled out of the same credit operation or not. Just remember, that if you have multiple accounts with the same bank, they might arbitrarily decide to cut back your credit, so you need enough accounts with unrelated banks to hedge against that risk. In addition, accounts acquired by a bank, such as if you had a Providian account before WAMU aquired them, are often under more scrutiny by the acquiring bank for their risk, so those accounts might have their terms raised, or credit limits dropped to reduce the bank's risk. Also on any new accounts, don't look at just the teaser rate, but accept only the best long term fixed rates. Companies do vary, however, in how reliable they are in honoring their promised fixed rate in the long run. Once you have begun to establish a good payment track record, you don't need companies that do not meet their own obligations. The hassle they cause when they screw up interferes with your other credit relationships more than any of their promises are worth.
Ontrack, Thank you for your reply. The Providian account is in my name only and the new WAMU account is in my husband's name only, so would this affect the possible credit line decrease situation apply? One thing is new to me and I'd like to expand on that for a moment... you said that when I gain more accounts with credit limits that matches the Beneficial one, that I can then close that one.. is that to EQUAL the total of credit available? Ive heard of people being turned down because of having too much credit available. What would be a safe credit line ratio versus income available to not be in the "too much credit available" catagory? I'd like to earn a credit score of 730 or at least over 700. I am at 672 at the moment. Would you have any ideas to help me? Would I be there after these accounts are paid in full, say in a year or do i need to keep some kind of balance to establish the points? Thank you again, for your advice. DiannaWV
You and your husband's credit reports, and credit scores, are separate. Since an account showing only on one report cannot be used to calculate a score from the other report, you need to treat your decisions as to how to maximize each of your scores separately. You want to build up a long history of "paid as agreed", and adequate total credit limits, on each report. You should still build a degree of diversity into your combined credit relationships, however. You would be stuck, if for example, you both depended primarily on the same CC company, that then decided to cut it's risk and shed some customers. You can analyze your risk by looking at what your credit situation, both available credit, and effect on scores, would be should any one company's accounts be closed, on both your reports if you both have accounts with them. Be sure to include all store cards handled by the same bank in this analysis. Since you use the reported accounts and history to support your next credit application, even if you have decided to move away from using one account, you first apply for, and start creating a good payment history with, a new account with better terms, before you close out the poorer quality account. By the time you actually close out the poorer quality account, you want the relative effect the loss of available credit will have on your totals to be minor. You also proceed in improving your total credit position in a paced manner, without creating a lot of inquiries and new accounts all at once. Otherwise you create the impression that you are seeking, and need, a lot of new credit, a sign that you may be in financial difficulties. You build your credit at times when you don't need it, so that you have good credit when you do, such as when you are ready to buy a home.
