So, you’ve worked really hard to pay off one or two of your credit cards…it’s really tempting to just close that credit card account so you won’t even be tempted to use it again, but should you cancel paid off credit cards, even if you’re not using them?
The decision to close a credit card account, even one that you aren’t using, is not nearly as simple as it may seem. Not only will closing the account limit the amount of available credit you have in the event that you need it at some future time, but you can also seriously hurt your credit score because closing that account can potentially affect two separate credit score indicators, your credit utilization and your payment history.
Remember, your credit utilization score is the percentage of your total available credit that you are using at any given time. So, if you’ve got $3,000.00 in total credit, but you’re using $1,000 of it, your credit utilization score is 33 1/3%. But, if you close one credit card with a $1,000 credit line, then you’re reducing your available credit to $2,000, and if you’re using $1,000 of that amount, your credit utilization score will immediately jump to 50%, and that’s way over the 30% credit utilization score that lenders like to see.
And that’s not the only thing that closing an account that is in good standing can affect. When you close an account with a long payment history, that you’ve had for a number of years, you’re running the risk of lowering your credit history score, which is based on how many years you have had credit and whether or not you’ve made regular, on time payments.
So, is closing the credit card account really worth the risk?
Although closing a credit card account can negatively affect your credit score, there are times when it makes sense to close the account… especially if the credit card has a high annual or even a monthly fee and/or you can replace the available credit with another credit card with no annual fees, or maybe even a lower interest rate.
Either way you choose to go, think before you cancel that credit card!
So, you’ve been paying attention to your credit scores, and you understand the payment history, age of accounts, and other stuff, but do you know what the Credit Utilization score on your credit report means? Credit utilization is exactly what it sounds like, it’s how much of your available credit that you are currently using. You can calculate your credit utilization by taking the total amount of credit that you have available on all of your credit cards and dividing it by the balance owed on all of the cards.
For example, let’s say you have a credit card with a $1,000.00 credit limit, but you’re carrying a balance of $600.00 on the card – that means you’re using 60% of the total available credit that you have with that credit card provider, which may not seem too bad to you, but to a potential lender, it means you’re using the majority of your available credit. If your credit cards are maxed out, you’re using 100% of your available credit, also not a good thing.
Typically, you want to use 30% or less of your total available credit at any given time, and if at all possible, you want to break that down even further and use only 30% of your total available credit on any individual account, as well. (Unbelievably, some creditors and credit bureaus also look at individual credit cards now, too!) Using more than 30% of your available credit actually brings your credit score down a few points to a lot of points because your credit utilization score accounts for 30% of your total credit score.
So what can you do to better your credit utilization score? Ideally, you should pay off all of your credit cards every month, but in the event that you can’t, you might want to consider getting another credit card to increase your available credit – that credit card can be a balance transfer card, a regular credit card, or even a catalog shopping card (like a Fingerhut Credit Account), just as long as you don’t go overboard when applying for new credit cards, and just as long as you don’t run up a new bill on your new credit card!
Note: Your Credit Utilization Score only includes your revolving credit accounts. Any mortgage or automobile loans are not taken into consideration.
Looking for easy ways to improve your credit score?
Do you have bad credit? Maybe you missed a couple of payments? Maybe you’ve had a bankruptcy? A foreclosure? Lost your job, got a divorce, or worse? Believe me, I understand why anyone might need a quick way to improve their credit score… when I first started trying to improve my credit score, it was in the mid 400’s, and that is a very poor credit score. In the beginning, it seems like it is hopeless… that you’ll never be able to climb out of the credit pit that you’ve fallen into, and you will be tempted to just give up and accept the fact that your credit score will always be bad… you’ll never get that new car, never own a home… never even have a decent credit card with a limit above a couple hundred dollars… Sounds familiar, doesn’t it?
Your credit doesn’t have to stay that way! There are so many easy ways to raise your credit score! With a little effort on your part, and by choosing the right credit options, you can improve even the worst credit score in a relatively short period of time.
How do you improve your credit score?
Basically, the easiest way to raise your credit score is to concentrate on those areas where your credit score has taken the worst hits. Not sure of where that is? First and foremost, you should know your credit score AND you should have a detailed credit report at hand to review in depth so that you can determine those areas where you can improve, those areas where your information is missing or inaccurate, and those areas where you really can’t do much more than to wait for them to drop off your credit report (typically seven to ten years).
These days there are lots of places popping up online that tell you that they will allow you to study your credit report for free, but before you sign up, make sure that it is a reputable site, one that not only gives you your credit score and report, but also offers credit monitoring, protection, etc., usually for a monthly fee. Although you don’t necessarily have to use it at first, at some point, I highly recommend signing up for credit monitoring AND actually learning to use it! The monthly fee is typically less than $25.00 to $30.00, but in the long run, that monthly fee is nothing when compared to the improvements that you can make simply by being able to see all of your credit information in one place ANY TIME you want to see it. (Those free places only allow you to see a small amount of information on a monthly or even quarterly basis – if you’re serious about improving your credit, that is not nearly enough!)
Believe me, you will want to check all three credit bureaus regularly because your score can be very different at each one, and when you dispute something at one credit bureau, you will have to dispute it at all three because they don’t share much, if any, information!
Once you’ve signed up, and have had the opportunity to study the information contained within your credit report, then you can begin to improve it, first by reporting any inaccuracies (disputing is easy – you just submit it online!), and then by working on two other key items:
These two simple components of your credit score are also the two easiest components that you can easily improve and they’re also two of the most important factors in the calculation of your credit score, so let’s start with what you can do to improve them!
Easy ways to improve your available credit and your payment history!
One of the fastest, easiest ways to improve your available credit is to pick the right credit source, apply for a credit account, and then keep the majority of your available credit balance open on the card. But what if you can’t qualify for any credit cards? Will a single $300.00 available credit balance be enough to really improve your score? That depends. If you have no credit history, having an open $300.00 line of available credit will certainly help your score. But, if you’re actually trying to improve on a bad credit score, there is an easier way.
“Store” or “catalog” credit cards are the easiest credit cards to get, especially if you have bad credit – and yes, before you ask, some of those credit “cards” are better than the others when it comes to improving your credit score. (Not only has this been my personal experience, but that of millions of other Americans, as well.) So, what’s our recommendation for the easiest store/catalog credit card to get approved for?
Fingerhut is the easiest store/catalog account to get approved for!
That’s right, Fingerhut is the easiest store/catalog account to get approved for, and it’s also the best store/catalog account to use when you’re trying to improve bad credit. Why do we recommend Fingerhut? Well, lets start with the features Fingerhut say that you can expect when you open a Fingerhut account:
With a WebBank/FingerHut Credit Account, buy favorite brands with low payments.*
Apply for Fingerhut Credit today. Fill out our easy online application.
Now, here are the benefits that Fingerhut doesn’t tell you about:
Fingerhut regularly reports the status of your account to at least one of the three major credit bureaus. This status includes not only the balance due on your account and if your payments are made in a timely manner, but they also report your available credit, and that’s what we’re trying to improve.
Fingerhut regularly reviews your account to see if you are making your payments in a timely manner, how much you’ve paid, etc., and if your account is in good standing, they may offer you a credit line increase of a couple hundred to even several hundred dollars! That’s right, it’s been my experience that Fingerhut will significantly raise your credit limit the more that you use the account to purchase items and as long as you make regular, timely payments. And that significant credit limit can also significantly improve your credit score!
Fingerhut offers an interest rate on purchases that is often equal to, or even lower than, other store/catalog sites and even many credit cards. Especially if your credit is less than perfect, you are likely paying as much as 33% and even as high as 39% interest on some credit cards – a typical Fingerhut account will be in the mid to slightly up 20’s when it comes to your interest rate.
Fingerhut does not charge a monthly or even an annual fee simply for having an account through WebBank. Compare this with other store/catalog sites and most credit cards and you’ll see just what a benefit this is!
Fingerhut offers brand name merchandise at reasonably competitive prices. Yes, you may sometimes pay a little more than you would at your local big box or discount department store, but you will also find that you will oftentimes pay less than at other catalog/store sites, and even at some of your local retailers. Ordering is fast, easy, and your order is shipped promptly… right to your door!
Check out Fingerhut.com now to see how fantastic their site really is!
Still think it isn’t easy to improve your credit score?
It’s far easier to improve your credit score once you actually get started. My low credit score kept me from so many things… but once I really started studying my credit report, once I removed the inaccuracies, and once I made a real effort to improve my score, it didn’t take near as much time as I thought it would… and improving my score not only helped me to purchase a new car at a low interest rate, but two years ago, I bought my first house!
What are you waiting for? Get started today!