Close a credit card and your score is lowered.
Even if you pay your credit card in full every month on time for years on end, you are still penalized if you use too much of your credit line.
I believe these illogical rules are purposely set up to lower scores, of even the most credit worthy, so they can bang you with higher rates when you apply for credit.
Close a credit card and your score is lowered.
Even if you pay your credit card in full every month on time for years on end, you are still penalized if you use too much of your credit line.
I believe these illogical rules are purposely set up to lower scores, of even the most credit worthy, so they can bang you with higher rates when you apply for credit.
Exactly. I have never checked my credit score, and I certainly don't care to. I do not use credit - never have, never will. If I can't pay for it in cash, then I don't need it regardless of what I may think at the moment. It took me nearly 20 years of saving to purchase a home, but when I did it was mine (with the excecption of a dowry to the county tax collectors annually). Most people will roll their eyes and cast sarcastic comments, but I sleep well knowing I have never lived outside of my means even if it meant eating rice and ramen noodles for weeks at a time when I was younger. It is possible - people just need to set their priorities in order. Or ..... keep being screwed over by banks and CC companies.
Actually there is if you look at it from the creditor POV. A credit score does not reflect how likely you are to pay your debts, though it does reflect that indirectly. What it really does is it tells the credit companies how much money they can make off you. The more likely you are to close an account, the fewer fees they can charge you.
The way to win that game is not to play it. No credit cards. Get rid of them. Never ever use them.
It’s even worse than that. If you don’t carry a balance on your credit lines, your score will also be lower. The best way to raise your score is to never pay off a loan early, never pay down your credit cards, and keep at least a few lines open with a balance at all times (don’t just have one card, have three or four, but don’t go overboard; too many will also drop your score). As noted elsewhere, the score is really about how good of a client you’ll be to the companies i.e. how much money will they make off of you, not how good you are at staying out of debt or how responsible you are. All they want to see is that you can pay their maintenance fees.
The purpose of FICO scores is to measure risk. The risk a lender takes in lending money on credit.
Closing a credit card can lower the score because it means you are not using credit or using less credit. Using credit in several different forms and paying as agreed increases your score.
You’ve proven you can pay as agreed using credit.
If you never use credit, which can be extremely wise financially, causes you to be a blank when measuring risk to extend credit. It is just not known from this whether you will pay as agreed if given credit.
Before you say it, I believe having a personal relationship with a lender who knows your character is a far better system. That’s the way it used to be. But that would greatly limit the time and amount and varieties of credit available today.
Again, it would be better if you never borrowed a dime; however, if you do wish to use credit, the FICO score gives the lender a measure of your risk quickly, and that’s become a valuable thing for those lending and borrowing today.
BTW: Paying your cards off each month will lower your score, but most people don’t know that the balance reported for scoring is before the bill and pay date. So to get the credit score for it, you need to pay it off and keep it down for at least one reporting period, say before you go for a major purchase.