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Posts: 4228
Joined: Sat Jul 15, 2000 2:02 pm

Credit Score Question

Wed Dec 16, 2009 6:32 pm

So I got duped into opening a card at a clothing store last night to save some quick cash on a purchase... however upon further research this probably wasn't the best move in terms of my credit score. Am I better of just paying the balance today and canceling it, or just leaving it open and never using it?
Posts: 474
Joined: Mon Dec 10, 2007 1:46 am

RE: Credit Score Question

Wed Dec 16, 2009 6:45 pm

Hopefully this helps coming from a former credit analyst for a bank.

Opening the card is not necessarily a bad move. Sure, the interest rate is probably through the roof, but shouldnt kill your score.

Your best option is to leave the account open as the longer you have open accounts in good standing, the better it looks on your credit report. Closing one immediately does not look as good as having a reasonable limit and not using much of it.

You should try to charge one small item a month or every two months, and pay off the bill as soon as you receive it to avoid obscene service charges/interest. Try not to carry a balance, and doing so will not only show the bureaus you are responsible with credit, but it will show the merchant bank you do not need the card, and they are likely to increase your limit. All of these factors will actually increase your score.

The only negative aspect from simply opening the account is you will have an inquiry on your report, which provided you have not applied for credit repeatedly, does not particulaly fare badly for you.

Like I said, hope it helps.

My $.02
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Posts: 335
Joined: Sat Jul 26, 2008 9:57 pm

RE: Credit Score Question

Wed Dec 16, 2009 8:02 pm

I dont see why opening a store card should effect your credit rating.

Its always a good idea to have a few credit/store cards because it shows potential lenders that you are responsible with credit and good with handling your money.

For example a person with 2 credit cards and 2 store cards who has kept their accounts in good order for several years will generally have a better credit rating than someone who has no cards. At least thats how it works in the UK.

Like ATCtower advises I would keep it open and use it now and again and avoid paying any interest. The only way I could imagine it effecting your credit score is if they gave you a massive limit therefore another lender might be worried about giving you more credit due to the fact you already have lots of credit on this card. However as it is a store card I doubt its got a very big limit so I would not worry about it.
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Joined: Wed Nov 29, 2000 11:57 am

RE: Credit Score Question

Wed Dec 16, 2009 8:09 pm

It is believed that ratio-of-balances-owed-to-available-credit plays more than a 30% role in determining your FICO score. Obviously the lower that ratio is, the better; and the more accounts you have with low-to-zero balances the better your score will be.
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Joined: Fri Sep 01, 2000 11:32 pm

RE: Credit Score Question

Wed Dec 16, 2009 8:19 pm

Leave it open, but pay it off in full. That means a ZERO BALANCE every month.

Don't cancel it. Just use it once and a while to buy some gum or something.
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Joined: Wed Feb 25, 2004 8:53 am

RE: Credit Score Question

Thu Dec 17, 2009 6:06 am

It'll probably drop your score a couple of points for a short period of time, if at all because of the new account and inquiry. Not a big deal in the grand scheme of things. You stand to benefit from a higher available line of revolving credit. Remember consumer credit decisions are not entirely based on score. If you are trying to purchase a car, I would argue you are better off as a 700 with a $25,000 credit card limit and $20,000 available than a 750 with a $500 credit card that you don't use.
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RE: Credit Score Question

Mon Dec 21, 2009 6:50 am

Just pay it off and leave it open.
Closing an account is worse than opening one.
oh boy, here we go!!!

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