keep open or close

alright i just paid off both of my credit cards.. limits of $5000 and $1000. I am going to be using the $5000 for repairs to my first rental property... My question is should I close the $1000 limit one? Will it improve my score? or should i just try and renegotiate the interest rate, as it is a very high rate?

Edited: 06/26/2010 at 04:43AM

Eric Foster

Real Estate Investor · Portland, Oregon

1128 posts
195 Influence
3 Awards

Icon_minipost Feb 16 '08, 06:31 AM

Originally posted by "kygregor"

... should I close the $1000 limit one?

Leave the account open!...

Closing it will lower the credit you have available, which in turn will increase the percentage of the credit that is being used. This will lower your score!

In addition, the length of time that account has been open is increasing your score. So if you close it, again the score could go down since you no longer have a long established open account.

Just buy gas or groceries on it once a month or so to keep the account reporting on your credit each month. Pay it off in full each month and the interest rate doesn't matter.

I would call and ask for a credit line increase and a lower rate...

As an example... It is way better to have $10,000 in available credit and only owe $2000 (20% utilization) than it is to have $5000 and owe $2500! (50% utilization)

Edited: 06/26/2010 at 04:43AM

Fletcher Batts

· lagrange, GA

17 posts
10 Influence

Icon_minipost May 26 '08, 03:45 AM

i don't believe i could have said this better. this is exactly verbatim what i would say.
If you have not specific use for the card and you won't be using it on a regular basis there is something that can work to your benefit.
Tip alert****take the $1000 card. Assuming that you have the option of getting cash advances, take out whatever amount makes you comfortable. Now take the cash advance and deposit it into an no restrictions account. if you don't have a bank account, go to your local bank with the best interest rates and open a savings account. let's assume you have a Commercail Bank and Trust (CB&T) in your town. Deposit the money in a savings account. if you are really ambitious and assuming that you took out at least $500 dollars, use the $500 to purchase a CD, that's a certificate of deposit, not the new Maroon 5 CD. Get the best rate that suites you, I recommend 6 months fixed. let's also say that you have $650 dollars more to add to this. Purchase another CD with the other $500 dollars. Now, go to the loan officer at CB&T and get a loan. The minimum loan amount is $1000 with them, that why you added to it. With the loan money, DO NOT SPEND IT, deposit it back into the original account. make sure that you put the extra $150 in the account too to take care of interest. Set up your auto debit for your loan on this account. in 60 days, you will get positive remarks all around on your credit. You would now have...
1 open savings account, 2 CDs that will mature in 6 months with interest, 1 good standing loan account, and 3 accounts that will report to your credit report in a positive way.

Edited: 06/26/2010 at 05:15AM

Dominic Campasano

· Gilbert, AZ

9 posts

Icon_minipost May 30 '08, 07:57 PM

As they both have stated (and are exactly right) keep those accounts open AND ACTIVE. For an account to have a positive impact on your credit report and score, it must be at least SIX MONTHS OLD and have been reported on at least once in the PAST SIX MONTHS.

So basically what this means is if you do not use your $1000 limit card in SIX MONTHS it will have no impact on your credit report.

Do exactly what both advise and use it to buy gas and smaller items. I would only keep a max of $250 balance on that account at any given time.

There is even an argument that paying your balance in full every month is not as favorable as carrying an existing balance over month to month and make $100 payments and charging another $100 each month. Credit card companies that see people paying off balances in full call them Deadbeats!

Edited: 06/26/2010 at 05:16AM