credit card tips

Should You Cancel Old Credit Cards Or Reapply For New Ones?

Most people have at least one credit card. Even if you’re not using the card, and you’re not interested in swapping the balance to another lender, it still might be worth cancelling the card and switching to another one.

With credit card fraud on the rise, it doesn’t make sense to have a really old card lingering around unchecked. Moreover, your ancient credit card most likely won’t be benefiting from the latest zero percent interest deals on spending and balance transfers. Even if you have no intention of getting into debt, you can use the card for purchases for 18 months and save the equivalent cash in an ISA, so you’re actually making money as you spend!

In addition, many credit card companies are so keen to temp you back to their services, that they’ll often treat you as a new customer after a few months have passed. That means you’ll be entitled to all the offers that have since elapsed on your older credit card.

Credit_CardWhen To Hold On To A Card

If you travel frequently, or find yourself in any situation where you might require an emergency stash of credit, an older, empty credit card can be really beneficial, especially if you don’t have any savings to fall back on.

Weigh Up The Options

If you’ve got an old card lying around, and you’re in good standing with the credit card company, there’s a chance that your borrowing limit could be significantly larger than any new card you might apply for. The fact that you also won’t need to go through a credit check means that it’s often less hassle to keep an old card running if all you’re going to use it for is emergency purchases.

Will My Credit Rating Be Damaged?

There’s really no way of telling: Some lenders will look at your empty £7,000 limit credit card and think that it’s great you’ve got so much potential to get into debt but have stayed sensible. Others will view the massive unused balance as a ticking time bomb that you could fill up in a single day. Every situation is different.

It’s definitely worth checking out your credit report to see if everything is in order before you make a decision to switch cards. Credit Cleaner allows you to check your credit score and amend any admin errors. They offer advice for repairing and improving bad credit ratings, all for a low monthly fee. Hunt down a Credit Cleaner review to see if the service is right for you. Click here for more information.

How Do I Cancel An Old Card?

It’s best to make a direct phone call and have the account shut down. You’ll still be able to access your account for a short time, so make sure you completely stop using the card or payments might still go through. This is because the card company needs a small buffer period to make sure everything is in order and the balance has been settled. It’s also worth noting that simply chopping up a card won’t suddenly close your account down.

Keeping an old credit card hanging around can be a great piece of mind for emergency situations, but it pays to shop around and find the right deal. You may be missing out on some great offers!

Wendy Lin is an author and mother. Although she travels many months out of the year, she always tries to take her family with her as she prioritises her family above business.


How Your Credit Score Is Determined

credit scoreLike income taxes and 401Ks, credit scores can be mysteriously difficult to understand. With the overwhelming majority of the population being affected by them, one would hope there would be a simple method for individuals and families to calculate their own scores. Of course, the same could be said for taxes and retirement plans, but we know how that story goes…

Although the specific calculations are convoluted, and typically hidden from the public, the commonly accepted and standardized scores used by lenders are made up of five primary factors listed below, in order of highest percentage of impact to lowest:

35%:  History of Payment

If there is one question lenders want answered, that question is: Will payments be made on time, and in full? Above all else, this single fact determines worthiness and reliability in lending. More than how much money is in an account, more than how much income a household makes in a year, this is the key: if a history of paying the proper amounts on time can be shown, the most important base has been covered.

Although an occasional late payment is a rather common accident amongst American families, credit scores don’t react nearly as badly to one late payment as it does consecutive or patterned late or non-payments. Do not panic if a single payment was accidentally missed; the scores looks for repetition.

30%:  Amounts Owed

This factor can be initially misleading, in that people tend to assume that the higher amount one owes, the lower their score must automatically drop. However, there is a critical difference to be made: the significant amount is the ratio of available credit that is being used. Simply put, the lower the percentage of available credit, the lower the score.

The reason creditors care more about percentages and ratios than raw amounts is that when an individual is using a large percentage of their available credit, they are considered financially over-extended, and carry a higher risk of not paying on time. Again, paying on time and in full is so important, that not only is payment history the strongest credit score factor, but the next strongest is simply trying to show lenders if people will pay on time in the future.

15%:  Length of Credit History

Another factor that is commonly misinterpreted, having a longer credit history does not necessarily translate to a higher score. If poor credit is shown over a long period of time, that will have a proportionately negative effect on a score as having good credit for the same length of time would yield a positive effect.

Yes, lenders are certainly more leery of rookie or inexperienced credit users, but a score is not automatically low just because an individual or family is new to credit. In fact, only a few months of reliable credit payments actually yield quite a high score, but to get a score to prime levels, it does require good behavior shown over a longer duration.

10%:  Types of Credit

With the wide variety of credit cards, loans, installments (monthly payments), mortgages, and other types of credit available, more is not always better. Results seem to show that the two most noteworthy conclusions to draw from this section are 1) lenders prefer users who have managed credit cards properly, to those who have not managed them at all (meaning using a card is probably worth your while), but 2) do not open a credit card or other form of credit unless you intend to use it.

Paying monthly installments, a mortgage if one is in use, and a responsible credit card is more than enough to boost this portion of the credit score.

10%:  New Credit

The myth that simply opening a line of credit will drop your credit has been exposed; this is simply not the case. However, a dangerous red flag to lenders is when a household opens up multiple forms of credit in a very short amount of time, particularly if that household is not already an established, trusted credit user. When getting started, avoid rapidly opening multiple accounts.

Written by Clif, a freelance writer for SereniCare Corporate Marketing, a Phoenix-area franchise opportunist. For further questions about credit scores, you can find more in-depth explanations at myfico.com. I hope this post was an enjoyable and worthwhile read for you.


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