New credit-cards offers are a temptation for many of us looking for the lowest interest rates or the eye-catching, wallet-filling rewards.
Is it really worth it? Is it also worth keeping all those credit-cards for better or worse in the financial conundrum simply to not hurt credit scores?
Experts argue that while keeping a good credit score is important, keeping a balance also goes a long way. So venture in the promise land of new credit-cards, but now before financially assessing the older ones and making the right decision.
Of course, setting the right track and credit record is a difficult task. Consider just the college grads and the road they’re set to take. That makes us prone to think twice before lessening financial flexibility.
Specialists argue that this reluctance is often exaggerated. Perhaps due to lack of expertise, or awareness or good service from financial advisers.
Rod Griffin, the director for public education at Experian, sums it up:
“Don’t let concerns about a credit score cause you to make a bad financial decision”.
Credit scores are calculated based on a multitude of factors, including FICO score. Essentially, they boil down to the same guidelines. How you handle your credit, in whichever form it comes from student loans to mortgage payments.
Make timely payments and don’t exceed the credit lines and that is guaranteed to make up for a good score. However, extra attention is required to the amounts you are tapping into.
That is called credit utilization and it stands for the percentage of available credit on a certain credit-card at one point in time. As the available credit decreases proportionally to how much you borrow, the credit score goes down.
Pay attention and keep a balance and these things should sort out by themselves. Also, terminating a long history credit-card account has some impact on the overall credit score. Yet, it is not as important as you might think.
If you consider the possibility of doing so regardless, with all the other factors in good check, and at the same time are thinking of applying for any type of loan, hold off the closure until the loan is approved, just to be on the safe side.
Proceed with closure and within three to six months the credit score typically bounces back. So it is easy to understand why closing a credit-card does not have such an impact on the lowering of credit score, assuming everything is done correctly.
Also, keep in mind that if the credit-card has no negative timeline connected, it definitely does not stand out as a red-flag in the credit score history.
Image Source: breakingfinancenews.com