VT
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No, you should not close the unused Visa, unless they are charging you fees and you cannot get them to waive the fees (annual fee, monthly maintenance fee, etc.) Here's how the card is definitely an asset to your FICO score.
15% of your FICO score is for length of credit history. The average credit user has an oldest open account
that has been open for 14 years. They also score you on the average length of time all your open accounts have been open. Leave it open and you'll continue to build history.
FICO puts you in scoring groups based in part on your length of credit history. If 1 1/2 years of history is all you've ever had, you will be promoted at the 2 year mark from the group of those having 0 - 2 years experience to the group with 2 - 5 years experience. You are scored based on how you are doing relative to others in your group. Once you leave the 0 - 2 years group, your score will have a chance to go much higher if your history is clean: you are less of a risk. See the tips, below, on using all 3 cards to score max points on the payment history part of your score.
30% of your score is credit utilization: how much of your credit limit is used up by your balance? On each revolving account, you need to keep your balance below 30% of your credit limit, or you will hurt your FICO score. For example, if you have a $200 credit limit, you must not have a balance higher than $60, which is 30% of $200. So that unused Visa account has a zero balance on it, and you can't get any better than 0% utilization. They also look at total utilization: they total up all your balances, and all your credit limits. That total percentage utilization must be kept below 30% of total credit limits. Close that old account, and you'll take away $0 in total balance, but you'll take away $$$ in credit limit, and up goes your total utilization.
10% of your score is on credit mix. The good types of credit are mortgage, secured car loan, major credit card (MC, V, AmEx, Disc) and store cards (Macy's, Home Depot, etc.). The bad types of credit are payday loans, personal-finance loan accounts for purposes of cash advances, and overdraft loans. Ideally, you want to have at least one or two accounts for each of the good types of credit. Close the last account in one of the good types of credit, and down goes your score.
So what to do with a card that has only a $500 limit?
(1) Make a small, NECESSARY purchase each month on that old card, and prove that you can pay it off in full. You are in danger of having that card automatically closed for lack of use. You need to use it about once every 6 months to keep it open. It is NOT necessary to carry a balance and pay finances charges to score max points on the 35% of your score that is for payment history. To get max points at $0 finance charge, just make the small necessary charge every month (e.g., a utility bill on automatic payment) and pay it off on time, every time.
(2) Call the credit card company. Ask them to raise your credit limit (so that you'll have less of a utilization problem). Just by using the card, you may find that the credit limit automatically gets raised. But prove to yourself that the cc company wants to keep your business. Call them on the phone and negotiate with them in a pleasant, cheerful, polite way. Never yell, whine, complain or sound desperate. If they are charging you an annual fee, ask them to waive it permanently.
If you don't get what you want, politely ask to speak to the rep's direct supervisor. If you get another No, ask the supervisor how to get the credit limit raised. Then ask for the Customer Retention department. Same thing with that rep and his/her supervisor. After you've gotten 4 NO's, you'll be sure that you must go out and charge-and-pay-off for 6 straight months and then call again, every 6 months, until you get what you want.
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Liwei_Kuo
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Score is not the only thing that is determined when approving for a home loan. They want at least 3 credit lines, and at least one credit line with 12-24 months of history. Also they want a credit line with over 1500 dollars high limit. Try to keep those cards at least 12 months long before cancelling it, because lenders will take closed credit lines as long as they were paid good on it. Not having a balance does not help or hurt you, so unless you have annual fees that you don't want to pay, then go ahead and keep them open, doesn't hurt. Good luck. |
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