Last week I attended an "Improving Your Credit Score" seminar at Target and learned that once your credit balance goes over 50% of your credit limit it adversely effects your credit score.
18 months ago I had brought all my credit card balances to zero (with the exception of two interest free cards, Dell and Sears which I purchased a laptop and treadmill, respectively). My credit score was the highest it's ever been (between 750-780). A great accomplishment considering I was one of those college students in the 90's who accepted every credit card offer sent....and managed to max them out one-by-one on clothing, gifts, textbooks, shoes, etc.
Unfortunately, in my new single-income lifestyle, I started using my card again to buy school clothes (Gap), furnishings for my new home (Home Depot, Ikea & Target), work clothes for my ever expanding body (Lane Bryant). On top of that, credit card issuers started decreasing limits in response to the new Consumer Credit Bill President Obama signed earlier this year. So, I went from being just under the 50% ratio to now being almost at the max limit for all my cards. Needless to say, my credit score is in the tank.
So, the first thing I am doing to work towards my goal of 'Improving my Credit Score' is getting a copy of my Credit Report to make sure there are no inaccuracies and close accounts that haven't been used in a while. The second thing I am doing is working towards getting three cards to a zero balance and closing them. The plan is to tackle my Lane Bryant card (once I lose weight I will have no use for this card anyway), Gap (the discounts aren't worth the interest they are currently charging me) and my Dell card.
I will post my findings and progress on these two action items in the coming weeks. Thanks for reading!
I was told that you should keep the high limit cards open but cut them up and don’t use it. It’s good for your credit to have an open line.
ReplyDeleteYes - this is true. But you don't want to have too many lines of credit. I'm told 5 to 8 (at most).
ReplyDeleteGood point about keeping a card open - in fact the length of time you have a credit card open plays into the equation. For this reason, I always keep my Macy's credit card because it's the one credit card I've had the longest - since 1999 when it was Dayton's. However, cutting up the card may not serve you. It may be possible for the credit issuer to cancel your card due to non-use. Of course they'd advise you this before hand, and if you're anything like me it can get tossed with other 'junk' looking mail. I do use my card every once in a while, just to keep it open and pay the balance off right away.
ReplyDeleteGreat blog, Rebecca! Good way of keeping accountability to achieve your goals. By sticking with your plans, just think of the cools things you will have achieved a year from now!