Credit card closing questions

[Fireup2020]

I have searched for similar threads (found them, but those OP's situations were a bit different)

My FICO score is FINALLY in the low 700's - quite a haul from several years ago in the 500's

I have 2 Capital One accounts that do nothing for me (I think?) and I wonder whether I should close them. (zero balances of course )

(I rotate my cc's for FF miles - as soon as I accumulate enough miles between purchases and travel for 2 RT tix, I move on to other one- there are 3 - American Airlines, United, Continental) All bills except rent/util are payed via CC's - we are going to NOLA in Oct, so Continental just paid off! WooHoo!

Cap 1 does not report the "Avail credit"- so should not affect that facet of the score calculation, but one of them is one of my older cards....

I do understand that length of time is factored in along with total avail credit, timliness, and quantity of accounts. I will be purchasing a car in the next 12-18 mos, so my score is rather important to me (I'd love to pay cash, but will have to settle for a nominal or 0% loan)

Thank you.

 

[JustCurious]

You should close them.

 

[Goonie]

Here's a link at Fair-Isaacs....the FICO score people.....that explains how the FICO score is calculated and what is used in that calculation.

What's your score?

Good job bringing your score up into the 700's!!! Keep up the good work!

 

[maddythebeagle]

Cap 1 does not report the "Avail credit"- so should not affect that facet of the score calculation, but one of them is one of my older cards....

cap1 reports high balance as your limit...I wouldnt close if it is one of your older credit lines....

 

[Darryl]

Fireup, congratulations on improving your score. Use the link Goonie gave you and keep pushing that number up so you can benefit next time you take out a mortgage.

Don't borrow money for the car!!!!!!!!!

 

[jazz4cash]

Check it out before closing. Cap One discontinued the practice of reporting high balance as limit, which crushed utilization rate. Just to be clear here, when they report your high balance as your "Avail limit", it makes the utilization rate high, so some say that after a few months, this new practice will result in higher FiCo if you just stand still. here's a link with details.....................

Sorry About The Rate Increases: Capitol One Stops Harming Customers' Credit Scores, Starts Reporting Credit Limits - Consumerist

FWIW, I never pass on the chance to throw darts at FICO....what a scam!

 

[Peaceful_Warrior]

If the older card has a high limit, keep it open and close any cards that either have low limits or haven't been open very long.

Also, every few months call your credit card companies and ask for credit limit increases. Even though it usually counts as an inquiry on your credit report, your FICO will go up because your overall utilization goes down (% of usage to limits).

Though one person said not to take a loan for the car, I recommend buying the car on credit since the interest rates are low and you can invest the difference and end up with more assets when all is said and done.

However, being around 700 you aren't going to have any problems getting the best rates on a car loan so it's probably irrelevant if you close the accounts or not.

 

[JustCurious]

Though one person said not to take a loan for the car, I recommend buying the car on credit since the interest rates are low and you can invest the difference and end up with more assets when all is said and done.

The problem with this advice is, it sounds good in theory, but in practice, most people spend more on a car purchased on credit as compared to paying cash. Therefore, most people end up with less assets when all is said and done.

 

[maddythebeagle]

The problem with this advice is, it sounds good in theory, but in practice, most people spend more on a car purchased on credit as compared to paying cash. Therefore, most people end up with less assets when all is said and done.

I see....you are one of "those people"....considering your advice to just close the accounts, I see your angle....as the OP is looking for the highest credit score, my advice stands, dont close the cards...now move along...

 

[Peaceful_Warrior]

The problem with this advice is, it sounds good in theory, but in practice, most people spend more on a car purchased on credit as compared to paying cash. Therefore, most people end up with less assets when all is said and done.

Then the issue here is not which was is more financially sound, but rather, which way is more emotionally sound.

Speaking strictly financial, buying on credit and investing the difference... for cars of equal price, is better.

However, you are right that some people allow emotion to enter the equation and cannot view the car the same whether they are purchasing on credit or cash, and for those people it may in fact be wiser to purchase with cash.

Though for purposes of building a credit score, purchasing with cash is the worst option.

 

[Darryl]

Op, said he would love to pay cash but would have to settle for a nominal or 0% loan.

OP has also said he has made mucho progress on his FICO (I may be over reading, but his finances in general the last few years). I think I am reading about some very positive momentum.

A great way to sustain that is to reduce our exposure to the largest depreciating asset most of us own. The less we have committed to auto's the more we have available for appreciating assets. The less debt we have the more cash flow we have.

I am doing my part to my part to be a positive role model for OP by driving a $2,000 car. I do think I will upgrade to $5-10,000 range next spring after bonus' are paid and I will disclose that DW has a much nicer vehicle (but no loan).

 

[Fireup2020]

I will be spending < 18K (Rav4/CRV/Hyandai equiv) - unsure whether pre-owned or not - depends on availability/deals at the time. Current vehicle is over 110K mi now...want to run it as far and as safely as I can. Just because I have a 50K loan preapproved by USAA DOES NOT mean I plan on using it! LOL

Thank you Darryl - yes, you are correct - VERY POSITIVE FICO momentum!

 

[Gumby]

If I may make a suggestion -- when you do buy a car, look for one that is two or three years old, coming off a lease. These are generally sold by dealers as "certified" used cars. They will typically be low mileage and good condition for the age of the vehicle (since they were on lease) and someone else has already eaten the large depreciation that occurs once you drive a new car off the lot. You will get a much better deal this way.