Credit Cards Affecting FICO Score?

Hello everyone. I am about to purchase my first house and am trying to optimize my FICO score. Currently I have 3 credit cards. One is a Discover Card (I have had since 1999), another is a USAA card (that I've had since 2001) and the 3rd is an MBNA card. The first two I don't ever use anymore and the MBNA card I use for ALL purchases. I have heard some people say that canceling un-used cards can have a positive affect on your FICO score. Another school of thought will say that keeping credit card accounts with a long history, whether you use them or not, will have a greater effect. Just as part of my preface, I ALWAYS pay my FULL balance at the end of each month. My questions: I am wondering if getting rid of my old cards is better than keeping them when it comes to my overall FICO score? If keeping them is better, is it even better to use each one routinely? Also I've heard it can help to get an AMEX card, due to their high qualifying standards and requirements?

Public Comments

1. do not get a new card it opens another line of credit do not cancel the one from 1999 and 2001 if you cancel those lines it eliminates a long history. if they were cards from best buy that you had for 3 years or less that might be good , but long history are good to keep. do not pay thae balance in full every month - ut does not show history either - pay 90 % of it the the other the next month. That also shows that yo can pay on time and developes history
2. While the credit companies do like to see that you don't have too many cards, it is important that you DON'T cancel the cards that you hae that you're not using. You can cut them up so that you don't use them, but don't call the companies that you have the cards with to cancel. The reason being is that 30% of your credit score is based on how much credit you're using (how much you owe on all the cards) as a percentage of how much credit you have available (the sum of your credit limits). If you cancel the cards you're not using, your amount of available credit goes down. And even though you're paying off the balance at the end of each month, they will factor whatever your balance is on whatever day they look at it, so it's important to have as much credit available as you can. Also, as another tip, a few months before you go to purchase your house, call the credit card companies you have and ask them to raise your credit limits. if you're in good standing with them, most are more than happy to do this. This will raise your available credit and help your score. Check this web site that has an article about what goes into your credit score: http://www.bankrate.com/brm/news/credit-scoring/20031104a2.asp Good luck!
3. Closing your credit cards can help because it decreases your DTI (debt-to-income) ratio. A bank generally does not want to see you consume more than 40% to 45% of your income. Ex. If you make $1,000.00 a month and spend $30.00 a month on your credit card a month minimum, the bank would consider your DTI to be 40% if the monthly payments for the home you are considering purchasing will cost $370.00 per month. Your chances of getting this loan become a further stretch if you have poor credit or two other credit cards open with a minimum monthly payment that would put your DTI at well over 50%. Even though you are not using a credit card, it is often times counted against your credit because the cards are available for use at any moment. A $0.00 balance now cannot speak for your emergency or "It's on sale!" use of $1,000.00 after purchasing a $150,000.00 house. Keeping the cards open provides depth in your credit history; having over $1,000,000.00 loaned to you at age 18 and paying it back on time by age 19 will not provide as much impact as borrowing $100,000.00 over several years and paying it regularly and on time. Paying everything back early does not always work as well in your favor as much as you think. Banks, credit card companies, and the likes are in business for the same reason as every other business, to make money, and they cannot do that when you run down their charges and fees. Early payments tie partly into the depth perspective. Talk to the credit lender about how each scenario would improve your chances of getting the loan (if either stands to inhibit you to begin with). Closing the credit cards or keeping them open may not be the question that needs addressed.