Quote:It's totally stupid !!  My wife and I are both over 800 points and was told that if we shut off a few of our credit cards or request a reduction to our line of credit, our score would go down.   What the heck !!   

 

That's because a part of the equation is the ratio of available credit to how much you have utilized.  To give a simple answer I'll use simple hypothetical numbers.  Say you have a total credit line of $10,000.00 and you have a balance utilized of $1,000.00.  That means that you are using 10% of your available credit.  Now say you close a credit card account that has a credit line of $5,000.00.  You are still utilizing $1,000.00 of credit, but now you are using 20% of your available credit ($5,000.00).  So when calculating your credit score you are using more of your available credit.

 

Now there is more to it then that.  Somebody with the exact same balances earning $50,000.00 per year is going to have a lower credit score than somebody that earns $100,000.00 per year.

 

This is only a small portion of it, but hopefully it explains why your credit score will go down if you close accounts or reduce your line of credit.

 

I learned this lesson the hard way many years ago by thinking that eliminating credit cards would make my credit score better.  Now in my personal opinion, I wouldn't have more than 2 or perhaps 3 credit cards or lines of credit.  One piece of advice that I would give to people is to stay away from "unnecessary" credit cards such as department store credit cards or gasoline station credit cards.  I call them "unnecessary" because they typically can only be used at one place, and that place most likely will accept a traditional credit card such as a Visa or a MasterCard.

 

The other piece of advice that I would give to people is if you use your credit card, pay off the balance at the end of the month.  NEVER make just the minimum payment.

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