The Back Alley Archives

As you know we are having diffuculty getting a loan to remodel our home. Basically our income to debt ratio is out of whack. Our accountant told us he may be able to help us (after the 15th...today) to show that Bill's income is more than what it shows on taxes because of all the business write-offs, etc. BUT, I went ahead and pulled MY credit report...my score is good but I was wondering about all these old credit cards I have that I no longer use.

They have zero balance. Should I close the accounts? The credit report gave you "tips" to make your score better but they totally contradicted themselves. First they said get rid of credit cards you don't need. But then it said something about NOT getting rid of OLDER accounts. I'm not quite sure.

In any case, does it really help to close out old accounts? I realize it won't make a whole lot of difference for this particular loan need, but just for overall good credit purposes???

It will hurt you in the short time. I would leave them with zero balances until you have the loans you are looking for. At that point you could close them. Expect your score to drop though. It will shorten your credit history because you are closing long standing accounts. Overall, I am a fan of limiting the amount of cards you have but you have to do it when you don't need to use your credit so your score has time to rebound.

i think more credit cards early on when you're establishing your rating is good assuming that you are paying them off right away and maintaining a zero balance...once you've established yourself, you really don't need a lot of credit cards...i only have 2 cards (not including a company credit card)...i don't need more ya know? why would i need a home depot card or a sears card or a best buy card or a jcpenney card? the more one has, the more discipline one must be.

that's what we did...we cut em all up since we didn't feel the need to have them...i don't care if they're offering 10% off on your initial purchase if you use your pottery barn card...we had a consolidation of credit cards several years ago and haven't looked back...i've not seen any hit on my rating as a result...if anything, i've showed the agencies that i am prudent and have debt that is more controlled.

tex should weigh in on this.

Yeah, I only have two store credit cards...one is a VERY old Victoria Secret card that I have never used. And one is a Sears card which I have only because we made a large purchase (windows for 4 rooms of our house) and we got this no interest deal. It also now has a zero balance. The rest of them are various Visa/Mastercards that were either mine or Bill's before we got married. Thanks guys.

HA!! I just pulled my credit and found out some D-Bag in Louisville somehow ran up a 9,000$ hospital bill using my social somehow. I now have an alias of Joseph D. Keith

your icee-hot-stunnas alias eh?

I guess but I cant beat the timing you know trying to finance a car and all before the big day. I already started the process to dispute the shit on there so its been a wonderful.stressful morning here in Franklin,Tn

what social security did he use?

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Mom,

Rule of thumb is this....

Revolving Debt (credit cards, Home Equity lines, etc., stuff that can go up and down) you only want to have 2-4 accounts. You ideally want the balance to be less than 25% of the limit. The older the account, the better.

Installment Debt (mortage, car, etc. Time Based) These are more tricky. Almost any installment debt is good. Here is the deal with installment debt....Companies pay services to rate your credit based upon what they are lending upon.

ex. ABC Mortgage pulls your credit through Sarma (a credit agency) and asks for a very conservative pull. This means they only lend A paper and want to very severely grade their clients. You may have a 750 mid-FICO when you look at it online, but Sarma give you a 680. Why? It is mortgage enhanced. It lends more weight to how you pay your mortage/how big your mortgage is/how long it has been around/etc. I may have a 660 FICO online, but because I have paid my $300k mortgage on time for 15 years, I am more likely to get a better mortgage loan than someone with a 720 FICO that has been built with credit cards and car loans.

Anyways, Mom, if you don't have any other revolving debt, don't cancel the cards. If you do, get rid of them.

Tip #2

If you have maxxed out credit cards, they are lowering your score. If you have had them for a while and you pay well on them, even if it is just minimum payments, call the company and ask for an outrageously high limit increase. Ex. Your VISA limit is $800, ask for $15,000. You will get a supervisor and they will check your credit, but the chances are very good you will get a nice bump. I did this with a $1000 card and ended up with a $20,000 limit.

Cool thing about this...your maxxed out card just became a much better credit risk. Your $750 owed is now only 5-10% of the limit instead of 95%...thereby raising your credit score without paying any money.

Hopefully, the better score allows you to either get a better card with a lower rate, or find a signature loan to pay the damn thing off.

HA!! I just pulled my credit and found out some D-Bag in Louisville somehow ran up a 9,000$ hospital bill using my social somehow. I now have an alias of Joseph D. Keith

How are you disputing these things? Be careful about using the websites of Experian, Transunion and Equifax to dispute. You need to challenge the legality of the items rather than dispute their accuracy. This is a different type of challenge.

texMFgator in the HOUSE

Good tip about getting a CC limit raised to lower your outstanding debt % on the account. Might have to do that when I get out of school.

That is interesting Tex...seriously. We have a lot of credit card debt spread between about 5 cards. None of them are maxed out but I'd have to see HOW bad it is on the available credit vs. how much we have on it. I know on both of my big amount credit cards I probably am around 80-90% maxed out. But both are big name credit banks and with my pretty good credit score, maybe I can get them to up my credit amount...dunno though....to get to less than 25%, I'd need two of my cards to raise my limit to 35-40K...not likely.

I just went to my in-laws house and it really depressed me. Their house is exactly the size we need and here they are, two older retired people living in a house big enough for a family of 6. But I'm not mad at them or anything...the only reason they even want a house that big is so that all their kids and grandkids will come to visit them. But it just depressed me because it doesn't feel like we'll ever be able to afford the size of house that we need (or I would like to have anyway).

Mom,

You guys really need to look into the business line of credit. Remember, even though you are getting the loan with your personal SSN#, the line will not show up on your personal credit.

It won't erase your debt (you still owe it), but your personal credit will look a lot better. With the higher credit score, you can get better consolidation loans, whether they are home equity based or even signature loans.

When you hear real estate gurus talk about how they have millions in available credit, they got there by opening up business line of credits. Almost every single bank offers them and almost none of them reflect on your personal credit (as long as you pay on time).

If your business has been around for at least 2 years and your credit score is in the mid600's and up, go into a bank and tell them you want a business line of credit for $50,000. There shouldn't be any charges and the rates should be reasonable. Keeping the line around $50,000 will ensure that you don't have to provide a bunch of company financials. Go to 3-4 banks and do this over the course of 3-4 months and, abracadaba, you've got 200k in available credit lines that can be used whenever you want and none of it reflects on your personal credit scores.

Yeehaa! Let's work the system people!

How high are the interest on those BLOC's? I've heard they are rather high...but I guess what you are saying is that we would pay them off once we get our HELOC right?

BLOC's usually vary with the prime rate, which I think is hovering around 5.25% right now. At Wachovia, the BLOC was prime +0.5%, so right now their BLOC would be 5.75%. Not too shabby. I'm sure other banks probably add some points to prime, but on the whole, they are a hell of a lot better than a credit card rate.