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Visa, Mastercard, American Express - Credit Score question

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middlefield
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Visa, Mastercard, American Express - Credit Score question  Reply with quote  

Hello!
I heard a rumor that it is best to have more than one kind of credit card (visa, mastercard, american express, and discover) to raise your credit score. Is this true?

I currently have two visa cards, one I have had for 12 years, one for 8. They both have high interest rates. Am I best just keeping them as is? Should I try to switch to another card within the same company with a lower rate? Should I keep these, but then diversify with getting a mastercard or american express too? Does my debit card with a mastercard logo count?

Thank you so much for your input!
Post Fri Jan 25, 2013 12:22 am
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Wino
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Where are you getting your misinformation? This is another myth similar to the question you asked about "writing a letter" to have your credit cleaned.

Having two Visa cards from different sources counts exactly the same as having a Visa and a MasterCard from the same sources, assuming all other variables are the same.

What gets you a tiny boost is to have different types of loans: credit card, car note, mortgage, personal loan.

Although no one in the public has access to the actual formulas that are used, it basically works out to:

How well you pay your bills on time
How much you owe divded by how much you have available
How long you've had the different accounts
Types of loans/credit

And a couple of other variables that escape me right now. The effect on your credit is in that order above, too. You've had a hit on the first item, so that's going to take a while to clear. They tend to have an immediate negative impact and decline over time. What you need to do is continue to pay all the bills you have and pay them on time. Collections are minor, as long as they're paid, but they definitely have a negative effect.

Minor warning about American Express: The "available credit" is often reported as "the maximum amount owed at the end of the month." As you pay off Amex monthly, it is often at 100% of its "limit." The "rule" that I've heard is that utilizing 30% of your available credit gets you the best score, this will tend to put you toward the high end. Lower than 30% should be better for your score than higher than 30%, but I've seen nothing definitive to state that the 30% rule is actually true.
Post Fri Jan 25, 2013 2:31 am
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coaster
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quote:
Originally posted by Wino
Although no one in the public has access to the actual formulas that are used,.

Actually, there is quite a bit disclosed about how credit scoring is done, and it's disclosed by the licensors of the FICO score: Fair Isaac Company, on their website:

www.myfico.com

~Tim~
Post Fri Jan 25, 2013 7:02 am
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jim.sklansky
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I don't think that keeping more than one credit card will score you high. What you can do: collect your reward point regarding your card, then close your high interest credit card. Then use lower interest credit card.
Post Fri Jan 25, 2013 1:09 pm
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littleroc02us
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I don't even have a credit card, but my wife does and I'm a joint user on it. We have it only to play the FICO game and use it limitedly, but pay it every month. We have a mortgage and no debt and our credit scores are 800 and higher.
So unfortunately the only way to get a FICO score is to borrow money and pay it back.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Fri Jan 25, 2013 2:26 pm
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middlefield
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Thanks everyone! Yes I did get a bunch of misinformation on credit I guess! I had listened to a "improve your credit score" cd a few months back and I had gotten those two gems from that. I wish I could remember who it was by! I'm glad I checked into it.

So it is okay to switch to a lower interest credit card within the company? Does longevity with the same card factor in?

I will have to check out that myfico.com website.

Thanks again! Smile
Post Sun Jan 27, 2013 7:23 pm
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Wino
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Longevity of your credit lines is important, but counts for only a small percentage of your credit score; somewhere in the vicinity of 5% to 10%.

Also, you should not close an old account. A larger percentage of your credit score is amount owed divided by amount of available credit. Keeping a $5000 limit card adds 5000 to the bottom number, and therefore makes your debt to available ratio better.

Don't be obsessed with the score. Pay your bills on time. Borrow only when necessary. Pay off your debts altogether if you can, the only possible exception being your mortgage. Never close a credit line unless it has an annual fee. Going even further, never open a credit line that has an annual fee even if it offers rewards. (I'm expecting disagreement with that last statement, but if someone is organized enough to do it, then they're the exception, not the rule.)

In short, be an adult who considers purchases in advance, and your score will take care of itself. Don't fall into the consumer-debt trap. Everywhere you go, they offer you store cards. In the mail you get credit card offers. The local furniture store and electronics stores offer "one year, no interest" options. Why do you think they do this? I'll give you a hint, it isn't for YOUR benefit.
Post Mon Jan 28, 2013 1:40 am
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middlefield
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ok great info! That really clears it up. So, it is in my best interest to open a new lower interest credit card but still keep the other two, correct? But, with doing that, certainly still be responsible and not overspend. It really is simple - be a responsible adult Smile Thanks!
Post Mon Jan 28, 2013 1:36 pm
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