Credit Advice

This is an interesting question for me. My latest Equifax score stated: "The percentage of department store accounts or charge cards to all of the accounts in your credit file". I have yet to discover exactly what this means since it doesn't say whether my percentage is too high or too low but I am assuming too high. I have three open accounts classified as Charge card plus another closed account. Total accounts in my file is 14 of which 9 are open. I have 11 revolving accounts of which 7 are open. So which percentage is too high and what can I do about it? Open more traditional credit card accounts???

First, if you have the means, then definitely pay them off in full each month. Retail or department credit cards often have some of the highest interest rates in the market. Also I'd never encourage anyone to pay interest in the hopes of improving their credit score. Using the cards is enough keep them active in the eyes of the credit bureaus and credit score models.

The question of closing is tricky. Closing old accounts can lower your credit score since they help establish the length of your credit history. On the other hand, department credit cards are generally more expensive and less versatile than traditional credit cards. Here is what I would do:

If you have other traditional credit cards and your department credit cards are relatively new, you can close one every 45 days (Start with the most recent card first). Track your credit score before you close every one to make sure the last closure didn't have a material impact on your credit score. If there is a big credit score drop on the first closure, you probably have a thin file (little to no credit history) and you should keep them all open.

If you only have the department store cards or if your credit score is low, you should probably keep them open to help your credit score. When your score is high enough (650+), apply for a more versatile card and follow the methodology above.

Overall, department credit cards are not bad for building credit history but they will often cost you more and encourage you to overspend. Graduate to traditional credit cards when the opportunities arise.