603 People Helped
Member Since: February 2013
Incorrect. You have to use your credit accounts but you do not have to be in debt. Ideal utilization is about 10% or less with only one card reporting a balance. You do not need to carry a balance to have a balance report. Most cards report on statement date. If you have a balance on that date then that is the balance reported. You can pay in full and that balance will still be reported.
Try reading up some more on other credit related sites as well.
takeshi74's reply was:
Building credit takes time. Inquiries may take a couple of years to drop off but their impact decreases quite a bit after the first year.
It's not just a matter of whether you're using a card when you're considering closing. Utilization, as stated earlier, is a major factor to consider. If your 5 cards each have a $1,000 limit and one has a $500 balance with the remaining 4 at $0 your utilization would be ($500+$0+$0+$0+$0) / ($1,000+$1,000+$1,000+$1,000+$1,000) or 10% which isn't bad. Close those 4 cards with a $0 balance and your utilization would be $500/$1,000 = 50% which isn't good and is quite a bit over the 30% recommended max. Always do the math to determine the impact on utilization before making such decisions.
Also consider the age of your accounts. While closed accounts in good standing remain for 10 years, part of your score is based on average age of account and it helps to have old accounts.
takeshi74's response was:
Every person's score depends on a number of factors and the factors for people can and do vary. No one can tell you what's normal for you. If you want to know what's normal then you need to monitor your score over time to establish a baseline. Same as comparing anything else.
You only have yourself to blame for applying. Credit Karma shows you offers but you're the one that has to make the decision based on your situation.
As stated in the article, "Having more open credit accounts is good for your credit". However, none of the factors exist in a vacuum. You have to consider every factor affecting your score.
Having more accounts is a positive. However, new accounts will negatively impact your score-- particularly if your credit history isn't long and you don't have a lot of accounts.
Think of how averages work. If you have one account with 2 years of history and then add a new account your average account age is reduced to 1.
Credit inquiries also negatively impact your score.
As someone stated earlier, gradually open new accounts. Just because you can open an account doesn't mean that you should. If your score isn't that great you're going to get lower limits and higher APR's as a rule of thumb.
If your cards report on statement date and you're waiting for the statement to pay in full then it will absolutely hurt to have your cards reporting at 90-97%.
If you pay down the balance prior to report date with sufficient time for the payment to clear then you won't see the impact. It the balances and limits on your reports that impact your scores.
You can use whatever you want. However do not allow more than 30% to report. 30%, however, is not ideal. It is a suggest maximum. Ideal will be much lower.
This is incorrect. The problem is that the OP is not paying prior to report so the OP has high utilization. If the OP was paying prior to report date then the OP would not have poor/high utilization.
Early payment and paying more than the minimum have no effect on your score -- aside from the latter's effect on decreasing utilization. Either your payments are on time or they're late.
If you pay slightly more than tha minimums for a length of time with high utilization you can expect adverse action from any lender.