9 Replies Latest reply: Nov 27, 2011 12:12 AM by anadyr RSS

Dropping your card can be hazardous to your FICO score

Alumni Steward Platinum 8 Reviews
Currently Being Moderated

As one person discovered when they dropped their MR Chase Visa credit card, as shown in this article

(For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

  • Re: Dropping your card can be hazardous to your FICO score
    tryt53 Alumni Steward Platinum 5 Reviews
    Currently Being Moderated

    I really hate how these are calculated.  We get rewarded with better scores, the more credit cards we take out because it shows we have more credit available.  So wrong.

    (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

  • Re: Dropping your card can be hazardous to your FICO score
    tomagorn Silver
    Currently Being Moderated

    Interesting article.  I didn't know why dropping a card lowered your rating. Are there other things that FICO scores are used for--e.g., employment apps? 

    (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

    • Re: Dropping your card can be hazardous to your FICO score
      Alumni Steward Platinum 8 Reviews
      Currently Being Moderated

      Check it out  online.  Mortgage qualifications, car loan rates, even in some cases car rentals!

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

    • Re: Dropping your card can be hazardous to your FICO score
      profchiara Alumni Steward Silver 3 Reviews
      Currently Being Moderated

      The key to a FICO score is the amount of debt you have compared to the amount of credit you have.  It would not hurt you at all, for example, to dump a card with a credit limit of $2000-$3000 assuming you have other higher limit cards.  Let's say, for example, that you have cards with limits of $15,000, $20,000, $3000, and $10,000.  You would have a total credit availability (assuming you haven't used it) of $48,000.  Eliminating a $3000 card would not affect your FICO score at all.  However, if you eliminated the $20,000 card you would have cut your borrowing power almost in half.  Worse, if you got rid of the $20,000 and $10,000 card your borrowing power would go down to $18,000 from its previous limit of $48,000; worse yet if you were using a substantial amount of that and had not paid it off.

       

      No one can entirely figure out FICO and how it's calculated, but it is a well known fact that if you have a lot of available credit and usually pay it off monthly or regularly, your score will go up.  Eliminating a high portion of your available credit makes you more risky.  Go figure, I know.  But I'd rather pay annual fees and keep an above 800 score than risk losing that. (And I do pay all my credit cards off each month, which is what makes rewards cards worthwhile.)

      ProfChiara

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

      • Re: Dropping your card can be hazardous to your FICO score
        jasper100 Alumni Steward Platinum 10 Reviews
        Currently Being Moderated

        I do the same thing ProfChiara, I have many credit cards and pay them off each month so that I never incur an interest charge. And I take advantage of all the good bonuses available on the credit cards I decide to get..I too am confused why when you cancel a credit card, why that would effect your credit???

        (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

      • Re: Dropping your card can be hazardous to your FICO score
        Alumni Steward Platinum 8 Reviews
        Currently Being Moderated

        Having me the Fair Isaacs folks I can tell you that their algorithms are statistically valid. The account for all kinds of credit behavior including the super payer who pays off huge balances every month.  If you want to stay our of the credit drop soup, maintain a few cars, use them judiciously and pay them off each month, Remember the FICO score and your credit report has no idea what your income is so they rely on these observables,

        (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

      • Re: Dropping your card can be hazardous to your FICO score
        tomagorn Silver
        Currently Being Moderated

        Thanks, Prof.  Do debit cards count in this mix?  Also, my biggest (only) debt is my mortgage.  I presume that this doesn't count in ratio we're discussing.  Cheers.

        (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

More Like This

  • Retrieving data ...