BG Financial: Credit Card Advice

[Yuri-G]

so I made the mistake of opening a credit card with a major retailer (Best Buy). I wanted that laptop and I wanted it now, damnit. anyway, I've almost paid it off, and here is my dilemma... do I:

- put something else on there and keep paying small monthly amounts? it seems like this would be the best thing credit rating-wise.
- pay it off and close the account?
- other?

pretty sure if I close it now that will make my credit rating take a hit. but I'm not sure. I could think of some stuff to buy - I could use a camcorder for example - but most shit I could get from Best Buy, I could get from ebay or amazon at a fraction of the cost.

basically I want to close this shit but I'm thinking maybe I should leave it open, and I'm not sure which would be a better idea. thoughts?

for what it's worth, my credit rating could probably afford to take the hit. how much would it go down by closing the account, if anyone has an estimate?

[Dizzy]

You dun goofed OP you should've put it on another card. Average credit card account ownership length shows up on your credit report. Opening many cards and closing them after single purchases like this looks real bad so you're best off keeping it open and paid off (or using it, i guess) at this point.

[Guyverarmor]

Pay it off, then keep it open. Spend some on it, then pay it off the next month. Actually looks good on your credit report that you have a line of credit open, and make payments on them. I currently have a Best Buy card I am paying off, got about 500$ left on it ( had to buy some stuff for the apartment ). Once I pay it off, I will still use it for the odd DVD/Blu-Ray ,etc.

As said above, opening credit cards, spending, then paying it off then closing looks bad.

[Yuri-G]

ok so just buy some small shit on there and keep paying it off slowly. I guess it can't hurt. like I said, I need that camcorder.

[archibaldcrane]

I wouldn't go out of your way to use it. If you are buying things you have cash for and want to use the CC and pay it off immediately, fine - but don't feel like you need to keep buying shit on it otherwise.

Pay it off, don't close it, if you're buying shit from Best Buy anyways go ahead and use it (and pay it off right away, no sense in needless interest), that's it.

[Odesseiron]

Take this from someone who had $23,000 of credit card debt one time in their life. Do not spend what you don't have. Some of you might ask what I could possibly charge. Well trying to make a somewhat long story short, in my first and only semester of college way back in 1999 (fuck I'm old!) I was offered a student credit card. Mastercard. I of course being a dumb young adult took it. At first it only had a $500 limit, so I would buy something here and there, and pay it off fully. Over time this raised my credit limit. Before I knew it, I was charging literally everything. I bought so much shit. Clothes, games, anime, dvd's, cd's, anything. In retrospect I was VERY stupid about it, and I usually regret nothing in life. This is one of the two things I regret. Before I knew it, I was 25 with no savings and $23,000 in debt with 3 total cards. I still want to fucking slap myself for doing this.

At that point, one day I just woke and I said to myself "Hey asshole! Who's going to want to get involved with someone who is so financially unstable and doesn't know how to save movey!?" And the fact that I had 750 minimum payments wasn't exactly helping me save money.

My plan (which worked) was to put literally every single dime I earned to credit cards. Whatever wasn't going to rent (I live at home and am saving currently to move out) was going to credit. I rarely bought anything for myself. I paid off the lowest 2 or 3 cards first. I think I had 4 cards now come to think of it. I paid minimums on the most maxed out cards, and paid off everything I could on the lower. Some people say to do the opposite, but this worked for me. Within a few months, I paid off all the small cards. Then I had the monumental task of paying off the $20,000 card. factor in a whopping 21% APR and you're looking at a shit ton of money I owed. So over the course of 2 years, I took everything and applied it to that. I was finally free of that massive headache last year. I saved up a decent amount of money, and now I have my first ever new car that I'm financing.

Don't get me wrong, I love the credit score that it has given me. I have a 770 middle score. I have more credit than most people my age. I could probably finance a mortgage payment at a great rate. But the money that I lost, holy shit. I could have been out in my own condo and car, but now I'm just getting started at 30. It sucks, but I learned a valuable lesson.

OP, how this relates to you isn't really direct. If you have good self control, I would keep the account open and buy a couple of very minor things a month $30-50 and pay it off at the end of the month in full. It can slowly raise your credit. Again I'll say, if you can't afford it, don't buy it. I keep all my cards open now with minimal purchases and they have no lowered the credit limit on them yet.

[RKenshin]

As others said, avoid opening store-only credit cards.

It is good to have more than one credit card account, as 'too few accounts' can hurt your score as well. Likewise though, having too many accounts looks just as bad if not worse. I forget but I think the ideal number is like, 2-4? And you really don't want one of those to be a store-only card.

But yeah, since you already have it... don't close it. Just keep it open.

How this affects your score depends greatly on what your score currently is though, and your current debt/credit report.

Also, having a long history of on-time payments doesn't influence your credit score as much as you may think (even though it seems to make sense). That's something that is often misunderstood about the scoring.

In actuality the guy that has a 5-year old account with only occasional payments will have just about the same if not a higher score than if he had a 5-year old account that always had a balance. You typically get more points for paying off the balances quickly and keeping your debt/available credit ratio low, than you would for taking longer periods to pay things off and having your credit balances higher. It hurts quite a bit if you surpass more than like 60% or so (? forgot actual %) of your total credit limit in debt, and even higher than 30% starts to stagnate your score IIRC. Additionally, quickly paying off balances and not constantly using large amounts of your available credit gives you points for both not having to depend on your credit line to get by and for financial strength.

Of course, don't take that the wrong way. Those are still minor score influences, and if you pay off your balance every month it does look good. It's even better if you never carry a balance month-to-month.

The thing that trumps all of that is if you miss a payment and get reported. That alone can dip you up to 100+ points, regardless of how good your record is otherwise. This is another reason to avoid stretching balance payments out (not to mention, the additional interest you're paying).