The Live Richer Academy is open to new members! Click here to learn more.

How to Choose Whether to Decrease, Close or Keep Your Credit Card in 10 Easy Steps

How to Choose Whether to Decrease, Close or Keep Your Credit Card in 10 Easy Steps

By TheBudgetnista -  Tags: , , , ,

should i cut up or keep my credit cards?

I get these questions aaaaaaall, the time:

"Hey B, should I keep my credit card?"

"Tiffany, I heard that it's bad to close a credit card, is that true?"

"Budgetnista, will closing my credit card lower my credit score?"

Well, I'm here to answer your money questions and.....it depends.

Here's a step-by-step guide to help you figure out if YOU should close or keep your credit card(s).

1) List ALL of your Revolving Credit Accounts. These are accounts that allow you to continue to use them while paying them back. Some examples are: credit cards, home equity lines of credit (basically when you borrow from the mortgage money you have built into your home), retail (department store, gas) cards.

Unlike a loan, a revolving account doesn’t automatically close when the account reaches a $0 balance. It usually remains open and available for use until the lender or the consumer (you), chooses to close it.

2) Add up your credit limits. This is the amount the credit card company has said you can spend up to.

3) Add up your current balances. Your balance is what you currently have left to pay off of each card.

4) Divide your balance by your credit limit.   (example: if your balances equal up to $2,300 and your credit limits equal up to $10,000, then it $2,300/$10,000 = 0.23)

.
5) Multiply your answer by 100 (example .23 x 100= 23 = 23%). This number is your credit utilization rate. Credit utilization tells you how much of your available credit you use on a monthly basis. The key is to use some of your credit, but not too much. Ideally you want to be using between 20% - 30%. You get graded for how much credit you use by the credit scoring companies. About 1/3 of your credit score is your credit utilization rate. If you're paying all of your bills on time, but your score won't seem to improve, your credit utilization rate maybe over 30%.

6) If your current credit utilization ratio is between 20% - 30% or higher, then you SHOULD NOT decrease or close any of your credit card accounts. Doing so will make your credit card utilization rate even higher and your credit score lower. Continue to pay down your cards and try your best to stop using them until you get your utilization rate down (if it's above 30%)

7) If your ratio is below 20%, recalculate your ratio, but do so without your newest card. Length of credit history accounts for 15% of your credit score. You don't want to shorten your credit history and lower your score by closing an old card. So redo your math without factoring in your newbie card. What's your credit utilization score now? If it's still between 20% - 30%, you're good. You can decrease or close that new card. If your utilization ration is not between 20% - 30% without your newbie card, you need to keep it.

8) Keep dropping the newest card on your list until your find how many cards you can keep and still have a credit utilization rate between 20% - 30%.

9) Keep paying off your debt

10) Do a happy-dance, you FINALLY know how to decide if a credit card should stay or go.

Choose one.... 🙂
Happy Dance Gif

Happy Dance Gif

for those of you with not-so-much rhythm.... tee hee hee, this is so me.

happy dance gif

LIVE RICHER

Tiff

Sidebar: You might wonder where I learned this AWESOME info. I learned all about it and ALL things credit from this awesome book: What the FICO : 12 steps to repairing your credit by Ash Cash. Get you some here: http://www.amazon.com/What-FICO-Steps-Repairing-Credit/dp/0983448639

Get FREE Weekly Goodies!

Join the mailing list to get FREE weekly budgeting goodies directly to your inbox.
Tiffany “The Budgetnista” Aliche is quickly becoming America's favorite, personal financial educator. The Budgetnista is also an Amazon #1 best selling author (The One Week Budget and Live Richer Challenge), sought-after speaker and teacher of financial empowerment.
DISCLAIMER: Please read this Disclaimer carefully before using the www.thebudgetnista.com Website (the "Website") operated by CLD Financial Life ("us," "we," "our") as this Disclaimer contains important information regarding limitations of our liability. Your access to and use of the Website is conditional upon your acceptance of and compliance with this Disclaimer. This Disclaimer applies to everyone, including, but not limited to: visitors, users, and others, who wish to access or use the Website.

By accessing or using the Website, you agree to be bound by this Disclaimer. If you disagree with any part of this Disclaimer, then you do not have our permission to access or use the Website.

Tiffany “The Budgetnista” Aliche is not a lawyer, accountant, credit analyst or investment broker. Information Tiffany Aliche provides during her presentations is for informational and educational purposes only. Tiffany Aliche assumes no responsibility or liability for any errors or omissions in the content provided. The content Tiffany Aliche shares in this video, workshop and/or presentation is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness or timeliness. The information shared is from Tiffany’s personal experience wherein she increased her credit score, reduced her taxes, increased her earnings and shifted her business organization. Any reference to credit scores that “Jump like Jordan” should be taken figuratively—not literally. Any reference to credit scores that Jump like Jordan is not a guarantee that your score will increase similar to Tiffany Aliche.

Tiffany Aliche’s personal success is not a reliable indicator of future results. It is very important to do your own analysis before making any financial, legal or accounting decisions based on your own personal circumstances. You should take independent financial advice from a professional, or independently research and verify any information before implementing any information that Tiffany Aliche shares and you wish to rely upon.

Affiliate Disclaimer: We participate in the https://thebudgetnistablog.com/favorite-things/ affiliate advertising program, which is designed to provide a means for us to earn fees by linking to their products or services on our Website. The fact that we participate in this affiliate program means that https://thebudgetnistablog.com/favorite-things/ compensates us for the inclusion of links that are clicked on and our reviews.

Changes: We reserve the right to amend this policy at any time without any prior notice to you.
© Copyright 2020 - The Budgetnista Blog - All Rights Reserved
magnifier
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram