Friday, April 29, 2011

The Surprising Truth About Your Credit Score

Word on the street is that you should never have too many credit cards open. I've been told this piece of advice numerous times. I trusted it completely, because it seems so logical. Yet this piece of conventional wisdom is wrong, and potentially damaging to your credit. Believe me, I was as surprised as you are about this. If you are about to close a credit card, read this post first. It might make you think twice.

Your credit score is based on your credit history with various lenders. Part of this is the variety of lenders and the length of time you have had credit with a particular lender. The longer you have a history with a lender the better. Credit cards that have been open for a long time help your credit tremendously, regardless of whether or not you use them.  Therefore closing a card that you have had for years can really hurt you in the long run.

Next time you think your wallet is getting too full and you'd like to remove some credit cards - don't cancel them. Just put them in a drawer. Need to cut back on spending? No problem. Take the card out of your wallet, do not use it but do not close it. Out of sight is out of mind, but still available to help your credit score.

Another interesting factoid: AMEX apparently dates all accounts with the date of the earliest account you opened with them. If you have had a credit card with them from 2002 and open another one today AMEX will report that second account as being open since 2002 as well. Weird but true.


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