Good Credit, but application for card declined? I previously had 5 credit cards that were high interrest. (20-29%). I was never late or defalted in paying those cards. I sold some toys, and paid them all off at once, and closed all the accounts. I figured that after those accounts were off my credit report, I would get a lower interrest card. My credit scores were always in the 700-740 range. The only credit I have now besides basic house utilities is my truck loan, and verizon cell phone account. I recently applied for a Citi card, and was declined due to not having any revolving accounts. What should I do?
How long ago did you close your credit cards? And how long were they open? If you just recently closed them and your CB reflects that and they were open for longer than a year with no lates, I would call the phone # on your decline letter and talk to someone about it and if the first person you speak with doesn't give you a better reason ask to speak to a supervisior. Explain the reason why you closed the other cards being that the annual percentage rate was to high so you paid them off and closed them and now are looking for a better credit card.
I closed them about 9 months ago. The only cards I currently have are debit mc/visa for my checking accts. I don't really need a credit card, but I read that not having one is bad for your credit rating.
Credit Cards are a revolving type of credit and in my opinion are good to have as long as you pay on time and pay in full each and every month and never ever charge over 1/2 of your credit line (say your credit limit is 1000 then you should try to stay under 500 owed) And by paying it in full each month you would be using someone elses money for free because you wouldn't be paying finance charges (unless its a cash advance - stay clear of those) this is when your utilization comes into play. Good rule is to have both a mastercard and a visa and maybe an american express. So by having a revolving type of credit can boost your credit scores because it reflects how you handle different types of credit therefor building a better credit history. Hope this helps)
In general, closing accounts lowers your FICO scores, and with all your accounts closed, you may look like no-one will lend to you, even if the accounts are showing as closed by consumer. Lenders want to lend to consumers that other lenders are already lending to. They are lemmings, but that is the way it is. You would have been wiser to have opened the appropriate new accounts on the better terms that you were looking for before closing old accounts with high rates. Your credit reports do not show what interest rate or fees you are paying. You actually look most creditworthy when you have a lot of old open accounts with low balances. Get at least one revolving account open, either thru asking Citi to reconsider, applying for a department store or gas card (even if you don't use it), or possibly thru a credit union, and you should shortly be able to open others. If Citi turns you down, I would try a credit union next.
Thank you for taking the time to respond to my obvious lack of knowledge. My next question is about amex/discover. I read that having a credit account with no set spending limit can hurt your credit score. This was supposedly because they could not calculate the ratio of balance to spending limit used. Will having one of these cards hurt me?
Since you currently have NO revolving credit, yes it would probably hurt you, unless you ran it up, then paid it off and used it with only small balances. Although you might want an Amex at some point, at this point you would probably be better served by opening a VISA or MC that reports the limit. (For these accounts, assuming your credit is otherwise good, you don't want to be paying any fees, for the potential credit to just sit there.) Once you have a number of cards showing substantial limits, so that your actual balances result in low utilization, you should not have to worry about having an Amex (or a Cap One).
