I only had 3 credit cards, but one of the cards has just canceled their Visa program, so now I only have two open credit cards. This has dropped my score significantly! I will be looking to obtain a mortgage in the spring, but I'm afraid that I will not qualify for the best rates (as I would have previously) with this new score. Will opening a new card right away get my score up quickly?
What did your credit utilization ratio increase to after you lost the credit limit from the card that was closed? If your CU ratio has significantly increased, the best way to reduce it is to get a new credit card quickly and hope that you get a credit limit that at least matches what you lost. Do you pay your credit cards off in full each month?
My utilization went to 40% , and I pay in full every month. I'm thinking I will have to wait until the remaining cards are paid to ask for new credit so I can get a decent card with a decent rate. I had a 726 score and now I'm down to 684 because of this.
I thought that applying for a new credit card caused a "hard inquiry" on your credit report? Won't any inquiry lower the score further? I would be very cautious about applying for any new card, maybe just pay off the other cards?
A hard inquiry will result in a loss of 5 points max, and those points will return within a few months as well. "New Credit" only counts for 10% of your FICO scores. Your credit utilization, however, accounts for about 30% of your FICO scores, so it's much more important. 40% is too high, and your FICO scores reflect that. Get your CU ratio down to 10% or less and your scores should improve quite a bit. Since you pay your credit cards in full each month, the only ways to decrease your CU ratio would be to decrease monthly spending, get a credit limit increase on an existing card, or add a new card to the mix. If you do carry any balances, pay them off as fast as possible first.
Another reason your credit score went down after your credit card was close is loss of payment history. How long did you have your credit card? 35% of your credit score is made up of your payment history. To increase your credit score and make up some of the payment history you lost, you could add yourself as an authorized user to a existing credit card account.Ask your friends or family member to add you as an authorized user to one of their credit card account. Just make sure thecredit card account has perfect payment history and they can maintain a low balance, 10% or less of the credit limit. The longer the payment history and higher the credit limit the best your results will be. Thanks! Heather with BoostMyScore.NET
Thanks Heather L for your post, I forgot all about that, the loss of payment history because my supposedly comment was about the credit utilization, similar to the comment of Joshua. I will take note of that for managing my own credit cards. Cheers.
Your welcome, Good luck with everything. Let us know how everything goes. Heather with BoostMyScore.NET
If you pay in full before your statement cuts you wouldn't have 40% utilization. You would have 0%, regardless of how many cards you have. Your score dropped because your utilization went up. PIF before the statement cuts, let the 0% report, and your score will go back up. You don't need a new card or a new inq. Your avg age of account has not changed. Accts in good standing report for 10 yrs once closed.
