Although most consumers are familiar with FICO credit scores less people are aware of what actions could influence their credit scores or just how many decisions made by potential creditors are swayed by the person’s credit score range.
For fear of making uniformed decisions that could have a negative impact on their credit score many consumers prefer to keep the status quo on their credit management. Others learn by trial and error – which may often prove to be a costly error that could take a long time to correct.
One particularly grey area for many consumers is decisions made regarding the closing of unused credit card accounts and the impact of keeping them open.
Contrary to popular belief the credit history on your credit report that is associated with a credit card is not lost when you close an this credit card. It does however only remain on your credit report for a maximum of 10 years. Should the card issuer however request to remove the card history sooner you may find that this history will be lost and it could have an impact on your credit score at some time in the future. Until such time the credit history that you have built up over many years will count in your favor. Obviously the impact of the removal of the history will vary from one consumer to the next depending mainly on the number of accounts and credit history that the person has regarding other credit facilities. Length of credit history constitutes 15 of your overall credit score.
Another misconception is that having too much credit may damage your credit score. This is not true and having an unused credit facility can actually count in your favor when analyzing your debt to credit ratio. Ideally the total amount that you owe on credit facilities should not exceed 30 of your total revolving credit available. If you have reasonably high balances on other credit cards keeping a credit card with a relatively low balance can help you to attain a 30 debt to credit ratio. As this is one of the heavily weighted factors in the scoring in most cases it is advisable to keep a small balance on these cards and keep them open.
Charge cards such as American Express cards are excluded when measuring debt to credit ratios as these cards have no preset credit limit. A charge card operates more or less on the same basis as a credit card except that it has no revolving credit facility and must be paid in full each month. As long as you use charge cards responsibly and pay them in full on or before the due date they will not have a negative impact on your credit score.
Although it will not impact your score you do not want the card issuer to close your account due to dormancy and therefore should use the credit card occasionally to keep it active.
Department store cards and how the impact a credit score are another area of uncertainty for many consumers. Bank cards generally carry more weight on your credit score than do department store cards. If you wish to reduce the number of credit cards you have you should consider closing the department store cards as first option. The only time it will make sense to keep the department store card in preference to credit cards is when your credit history on credit cards is only a few months old whereas your department store card has been active for a number of years.
Author Resource:
Laura invites you to learn more about "Understanding Your Credit Score Range" at http://hubpages.com/hub/Understanding-the-Credit-Score-Range and "Tips to Increase your Credit Score" at http://hubpages.com/hub/Tips-To-Increase-Your-Credit-Score
![[Valid RSS feed]](http://www.look4articles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
![[Valid RSS feed]](http://www.look4articles.com/images/rss.jpg "XML Feed For RSS")