Tag Archives: credit rating

 

Mar19

When it’s Time to Cancel a Credit Card

Posted: March 19, 2018 by Ashley Dull

From the time we start building credit in our late teens or early 20s, many of us start collecting credit cards. Those credit cards inevitably begin to pile up, quickly overtaking even the most robust wallet.

 

By the time you can hardly sit for the bulk of your billfold, the idea of canceling a card or two starts to look pretty good. Even if your card collection has maintained a manageable size, you may need to consider whether it’s time for an upgrade; as your credit grows and financial needs change over time, your old cards may not be the best fit anymore.

 

For the most part, an unused credit card does little more harm than take up a slot in your wallet, and it may actually be helping your credit. That being said, there are two important reasons you may want to consider canceling a credit card: high fees or high interest rates.

 

To Stop Paying Unnecessary Annual Fees

 

The most pressing reason to close a credit card that isn’t pulling its weight is if it charges an annual fee. For example, while instant-approval credit cards can help build credit, they aren’t cards you want to hold on to forever due to the high annual and monthly fees they typically charge. If you’ve used the card responsibly, your credit score should increase enough to qualify for a better, fee-free card so you can leave the costly credit-builder behind.

 

At the other end of the spectrum, many elite rewards credit cards will charge high annual fees, with $400 to $500 fees not uncommon. While these cards often come with rewards and benefits that can make them worth the annual fee to some users, those who fail to make the most of the extra benefits may not be getting their money’s worth out of the annual fee. If you can’t justify the fee, cancel the card before your next fee is charged and look for a better fit.

 

To Avoid Paying High Interest Fees

 

The other main reason you may consider closing a credit card is if it charges a high interest rate. Although a card’s interest rate won’t typically matter if you never carry a balance, the temptation to use a credit card is always there so long as you have the card. If you have credit cards with interest rates above 20%, you may want to consider canceling the card and replacing it with one that offers a lower ongoing APR.

 

Credit Impacts to Consider Before You Cancel

 

While there are several good reasons to cancel an unused credit card, there is one solid reason to consider leaving it open: your credit score. Yes, closing a credit card account can potentially lower your credit score.

 

The impact of closing a credit card may be seen in several facets of your credit score, with the primary impact being to your utilization rate. FICO considers both your individual utilization rates as well as your overall utilization rate when calculating your score. Reducing your total available credit by canceling a credit card can increase your utilization rate if you currently have other credit card debt.

 

Other important FICO score factors can also be impacted by canceling a credit card, albeit to lesser degrees. Your average account age and overall credit history length (jointly worth 15% of your FICO score) can be reduced by canceling a card, particularly one that you’ve had for many years. While positive credit accounts will remain on your credit report for up to 10 years after they’re closed, closing very old accounts can have negative score impacts.

 

Lastly, creditors like to see a mix of several credit accounts and different types of accounts, as it shows you can handle a variety of credit products. As such, your overall credit mix, worth 10% of your credit score, can also be hurt by canceling a credit card, especially if you do not have very many other credit accounts.

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Aug13

5 Easy Ways to Rebuild Your Credit After BankruptcyRestoring Your Financial Health Is Possible

5 Easy Ways to Rebuild Your Credit After Bankruptcy

Posted: August 13, 2013 by Rachel Shepard

After filing bankruptcy, one of your main concerns should be repairing your credit. For some consumers, a bankruptcy filing can lead to a sense of hopelessness that can be difficult to escape. Once you come up with a firm credit repair plan, however, you can confidently begin the road back towards financial health. And with this type of plan, you do not have to wait too long to begin applying for credit again provided you take the necessary steps.

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Jun17

How Much Will a Bad Credit Score Cost You?With Poor Credit, You Could End Up Paying for Your Past Mistakes

How Much Will a Bad Credit Score Cost You?

Posted: June 17, 2013 by Rachel Shepard

If you have bad credit, you have probably already noticed how difficult it makes it to acquire a loan from your average lender. Many lenders do not want anything to do with you unless your credit score reaches a certain level, and even then, you could end up paying high loan interest rates. The truth of the matter is that having bad credit can cost you hundreds of thousands of dollars in additional interest payments over the course of your life, which makes the effort it takes to improve your credit rating well worth it.

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Apr19

5 Things That Maintain a Good Credit ScorePreserving Your Credit Is Easier Than You Think

5 Things That Maintain a Good Credit Score

Posted: April 19, 2013 by Rachel Shepard

There are many things a consumer can do to help them maintain a good credit score. Here are five simple steps to keeping your credit in tip-top shape:

1. Know what a credit score entails.

Knowing how a credit score is calculated is key. Your credit score is calculated based on five different things: your loan and credit card payment history; your level of debt; your credit age, or how long you’ve had credit; the types of credit you have, which should be a mix of credit cards and loans; and recent credit. Knowing where you stand with regards to all five of those areas will help you understand how good or bad your credit score is.

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Mar15

Credit Bureaus: Understand How They Affect YouThese Agencies Can Profoundly Impact Your Financial Standing

Credit Bureaus: Understand How They Affect You

Posted: March 15, 2013 by Rachel Shepard

Credit bureaus are agencies that research and collect consumers’ credit information. In the United States there are three primary credit reporting agencies: Experian, Equifax and TransUnion. Utilizing standard computations, these agencies collect information and tabulate it in a numerical equation that results in an individual’s credit score. It is important for you to understand not only what credit bureaus collect but also how these reporting agencies can personally impact you.

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Mar04

Why It’s Important for Your Credit to Pay Back Your LoanRepaying What You Borrow Is Critical to Maintaining Your Credit Rating

Why It’s Important for Your Credit to Pay Back Your Loan

Posted: March 4, 2013 by Rachel Shepard

Many reasons to apply for a loan exist, with the main one probably being that having this additional money simply allows you to make major purchases without saving up beforehand. Of course, loans eventually need to be paid back, and they generally come with predetermined repayment terms to which you must adhere. Failure to repay this money within the agreed-upon timeframe could lead to financial problems for you in the future. Therefore, it is vital that you work hard to stick to these repayment terms the next time that you take out a loan.

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Jan15

Beyond Banks: Other Places Your Credit MattersA Good Credit Score Can Be the Key to Your Success in Many Arenas

Beyond Banks: Other Places Your Credit Matters

Posted: January 15, 2013 by Rachel Shepard

Your credit score is a seemingly ethereal number that you likely only think of when you are considering acquiring a credit card or loan. Consumers rarely give much thought to their credit score beyond this sort of scenario. What many people do not understand, however, is how vital maintaining a good credit score is for overall financial health and who considers credit scores beyond financial companies. The fact is, there are many different entities that may look at your credit score, and having a good score can potentially save you quite a bit of money all around.

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Dec14

How Your Credit Score Is CalculatedKnowing the Process Can Help You Boost Your Credit Rating

How Your Credit Score Is Calculated

Posted: December 14, 2012 by Rachel Shepard

These days, having a good credit score is key to gaining access to all kinds of things. Because of this, of course, it behooves you to do whatever you can to get your score up as high as possible. And learning exactly how a credit score is calculated is important if you want to know what you have to do to boost your score and open all sorts of new doors for you as a consumer.

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