CC & credit score

lemen99

how do credit cards affect your credit score?  Does taking out an additional card hurt your credit score if you pay the balance in full every month?

Thanks!

IU_baby

There are a lot of factors that contribute to your credit score when it comes to credit cards.  The number of accounts you have, the balance to available credit ratio, the age of the accounts all contribute in some way.

Opening a new card, even if you pay off the balance every month will be a negative on your credit history for a period of time until that card is no longer considered "new".  How much of an impact one new account will have on your score may be minimal depending on the length of your full credit history.

lemen99

No wonder I was confused :-)

You are smart Laura - good answer.  

I just wanted to make sure I wasn't doing something dumb but opening a Target credit card. I guess as long as we don't open a bunch of new cards and keep them for a while we should be OK.  (We only have 1 visa now that we use, and another we have to close I've had since college.)

Mrs.Ashley

IU_baby:

There are a lot of factors that contribute to your credit score when it comes to credit cards.  The number of accounts you have, the balance to available credit ratio, the age of the accounts all contribute in some way.

Opening a new card, even if you pay off the balance every month will be a negative on your credit history for a period of time until that card is no longer considered "new".  How much of an impact one new account will have on your score may be minimal depending on the length of your full credit history.

This... and I think the "available credit" value is an important factor. So if you open a new credit card, it may bit a small hit to your score for a while, but in the long run, as long as you pay off your bill every month, it will be an asset to your score. It shows you have a history of paying your bill every month and it adds to your total amount of credit available. This affects the 30% number according to this article.

Mrs.Ashley

lemen99:

(We only have 1 visa now that we use, and another we have to close I've had since college.)

I would consider not closing this account. I'm not sure if actually closing the account is a hit to your score, but we leave old credit cards open (without using them) because it contributes to the available credit I mentioned before.

The goal is to minimize the (credit used) / (avail credit) ratio.

lemen99

Mrs.Ashley:

lemen99:

(We only have 1 visa now that we use, and another we have to close I've had since college.)

I would consider not closing this account. I'm not sure if actually closing the account is a hit to your score, but we leave old credit cards open (without using them) because it contributes to the available credit I mentioned before.

The goal is to minimize the (credit used) / (avail credit) ratio.

oh.  I'm not a finance person Thanks!

heatherchelle

Mrs.Ashley:

lemen99:

(We only have 1 visa now that we use, and another we have to close I've had since college.)

I would consider not closing this account. I'm not sure if actually closing the account is a hit to your score, but we leave old credit cards open (without using them) because it contributes to the available credit I mentioned before.

The goal is to minimize the (credit used) / (avail credit) ratio.

I took a personal finance course in college and the professor said that closing account does have a negative effect on your credit score, temporarily.  He still suggested closing unused accounts because 1. Many people will use the account to accumulate debt, and 2. people may not be as dilligent about checking the account and might not notice fraudulent activity right away.

I don't think either of those would be an issue for you, but if you feel uncomfortable having it open then I would close it.  The hit you credit score will take is not huge, and not long-term. 

manda429

Also, consider if you are doing anything in the near future that you care if your credit score is at a certain number...I would say saving the 5% at Target sooner is probably financially the better bet if you aren't refi-ing or taking out a loan anytime soon.

lemen99

Thanks ladies!

We just refi'd and aren't planning to request any new loans, so I think we should be good!

We do not use our other CC, it's just sitting so I'm not worried about debt accumulation - sounds like for the time being I'll just keep it open.  I didn't think about monitoring fradulant activity, although, if it's a CC that we never use, at least I shoudl be able to dispute any odd claims.

Thanks again!

NDwife07

Obviously your question was already answered, but I wanted to add that it seems like you'd have an excellent credit score anyway, so a little "hit" from opening a new card probably wouldn't affect your ability to get a good mortgage rate, etc.

It's like scoring a 99 on a test instead of a perfect 100. Sure, you'd like the 100, but with the 99 you would still keep your 4.0.

lemen99

haha Lauren

I realize I'm probably being anal about this but I figure why mess up a good thing!

NDwife07

lemen99:

haha Lauren

I realize I'm probably being anal about this but I figure why mess up a good thing!

Nope, not anal - smart. If everyone thought like you did about this stuff, maybe our economy wouldn't be in the shitter.

lemen99

NDwife07:

lemen99:

haha Lauren

I realize I'm probably being anal about this but I figure why mess up a good thing!

Nope, not anal - smart. If everyone thought like you did about this stuff, maybe our economy wouldn't be in the shitter.

This is true.  With 2 engineers it's the only way to think, but sometimes tiring overanalyzing everything :-) I totally have my mom to thank for teaching me about this sort of thing.  I'm so gald she did!

 

Mrs.Ashley

lemen99:

This is true.  With 2 engineers it's the only way to think, but sometimes tiring overanalyzing everything :-)

 

amen to this!

heatherchelle

I so wish my dad had taught me about money early on.  My parents are divorced and I lived with my mom until I was a teenager.  My mom is horrible with money, actually she's just an irresponsible person in general.

My dad, on the other hand, is a saver.  I think by the time he got to me it was too late.   I'm not the worst, I mean I'm better than my mom and better than DH with money, but I'm not really much of a saver. 

DH thinks I'm crazy because I insist that Isabella go to the bank with us to make a deposit when her piggy bank is full or she has gift money, etc.  I realize she's young, but if we do it now it becomes a habit and when she's older she'll start asking questions, etc.  I feel like it's a good way to get started.