Dear qoboosh:
Unless the card is very new, no, it will not reduce your FICO score.
Particularly given the payment history you describe, it will raise
your FICO score. I have provided extracts from two articles by Suze
Orman below explaining the interaction between credit cards and FICO
scores. Depending on your circumstances, you may want to raise card's
credit limit. I encourage you to read them, along with the complete
articles, to fully understand how your actions influence your FICO
score.
Sincerely,
Wonko
"Credit Reports: Check Them Now! By Suze Orman, Yahoo Finance
http://biz.yahoo.com/pfg/e02credit/art021.html
"Avoid the Biggest FICO Blunder
Do not close down your credit cards. So many of you call into my TV
show and tell me how proud you are that as you are paying off the
balances on your credit cards you are also closing down some accounts
so you will have just one credit card. I know your intention is
fabulous; you think that by getting rid of some cards your FICO score
is going to improve. But then you go to check your score and instead
of going up it is now LOWER! That's no mistake, it's just one of the
odd ways that lenders look at your credit. Let me explain.
Fifteen percent of your FICO score is made up of your credit history.
Your credit history is how long you have had credit. That makes sense;
while it's easy to be on good behavior for a short period of time,
what's really telling is how we behave over many years. ( Hmm... maybe
we should all get a personal relationship FICO score before we get
romantically involved...) So when you cancel some credit cards you may
be canceling a big part of your history.
Here's a common scenario: You have five credit cards. Four of those
cards are old friends; you got them between five and 10 years ago.
Your fifth card is your new fabulous friend you just got two months
ago; she's a beaut, with a low interest rate and a great mileage plan.
So you think you're doing the smart and responsible thing by canceling
the four old cards you don't use anymore. Really bad move. When FICO
goes to compute your score it is now looking at just a two-month
credit history, rather than a 10-year history. Moral of the story:
don't cancel the cards. Just stick 'em in a drawer (or better yet, a
safe deposit box) where you won't use them."
"Till Debt Do We Part
Another thirty percent of your FICO score is made up of your
debt-to-credit-limit ratio. Simply put, this is how much money you
actually owe on those cards (your debt) compared to the available
credit on those cards; what's called your credit limit. So let's take
a look at those five credit cards that you have again. Each one has a
credit limit of $2,000. So when we combine all five cards we're
looking at a combined credit limit of $10,000. Now let's say that you
really only use that one card you got two months ago and have charged
that card up to its max of $2,000. Okay, that's not too bad, because
when FICO looks at how much you owe ($2,000) in comparison to your
credit limit ($10,000) that see you have used up only 20 percent of
your available credit. So you have a debt to credit limit ratio of 20
percent.
But here's where so many of you go wrong: if you close those four
cards you aren't using, your total credit limit is now $2,000; so if
you charge $2,000 a month - even if you pay it off - your ratio is now
100 percent. That is going to be a major credit score bummer. So as I
said, just keep the unused card someplace safe; by not canceling it
you will be helping your credit score."
"How to Master the FICO Game" by Suze Orman, Yahoo Finance
http://biz.yahoo.com/pfg/e02credit/art031.html
"Pay your bills on time. This one point bears repeating for your
payment history makes up for 35% of your FICO score. Just like that
old schoolteacher who got on you for being late, lenders also hate it
when you're tardy. Being 30 days late with just one payment can send
your score tumbling; so be prompt. And if you can't afford paying the
whole bill, at least fork over the minimum amount due. And if you
realize that your payment is going to be late if you rely on regular
mail, spend the money to get it there overnight."
"Don't go card crazy. Opening a bunch of new cards is a yellow light
warning for lenders. Historically folks with a bunch of new credit are
in worse credit risk; so don't put yourself in that higher risk
group."
"How to Master the FICO Game-Continued" by Suze Orman, Yahoo Finance
http://biz.yahoo.com/pfg/e02credit/art032.html
"Raise your credit limit. This advice is only for those of you with
strong financial willpower. As we discussed in Till Debt Do we Part a
large portion of your credit score is determined by calculating how
big your monthly bill is compared to the maximum amount of credit you
can use. To make this debt-to-credit-limit ratio look even better,
call up your credit card issuer and ask for your limit to be boosted.
If you have a good payment history they'll probably be happy to
oblige. The trick though is that I don't want you to use that extra
credit. It's just like fourth grade math: the amount you run up on
your credit card bill is the numerator. Your credit limit is the
denominator. What we want to do is increase the denominator while not
touching the numerator. That's going to make your ratio improve."
"Pay off balances BEFORE you apply for a loan. It's important to
understand that your FICO score changes along with your payments, and
balances. So to make yourself look extra fabulous to a lender, try and
get your credit card balances as low as possible before you apply for
the loan. That way, when the lender goes to check your score, your
debt-to-credit-limit ratio is going to be super low which will boost
your score." |
