Need Guidance Trimming my CC Count

[Relayer]

I was recently able to pull some equity out of my home for a line of credit that's at a lower interest rate than any of my existing credit cards.

I transferred all my remaining CC balances to the line of credit. The benefit being a single lower payment at a lower interest rate (or pay the total amount I paid all CC each month to one account and pay it all off in two years)

Now, I'm sitting with a lot of available credit. I want to close some credit cards, but not all. I'm aware of the FICO score risks by closing them. I don't feel I need some of the cards, but a lot have yearly fees that I don't care to keep paying. I'd rather not dump my FICO into the pit, but will accept a small hit by doing things right and a little at a time.

I'll detail my cards in the order I've received them, the CL, and AF and then solicit your advice.

Orchard Visa, $400, $49

Orchard MC, $500, $49

Capital One, $500, $59

Direct Merchant Bank (DMB), $700, $0

Home Depot, $1500, $0

Providian Visa, $750, $0

WaMu Visa (Business card), $1000, $0

Wells Fargo Platinum, $2000, $59

Target, $200, $0

Target, $500, $0

Yes, there are two Target cards. They sent me two separate cards with different account numbers, via one instant application, and they have yet to complain or revoke either one.

So far, I'm expecting to keep the $0 AF cards and most likely the WF card. I already made a purchase with the paid off Home Depot card to take advantage of 6 mo. Same as Cash on a new appliance. The rest, I don't really care about. In fact before sitting down and really researching things, I went ahead and closed the Orchard MC. It had an annual fee that was due very soon. They only offered me $29 AF and a $100 CLI, but I insisted on <10% interest rate (currently at 24%) and no AF. The answer I got was, "We will honor your request to cancel the card, Sir".

Checking my account online, two days later, shows the Orchard MC still open. I may have to call again and either renegotiate, or demand it to be closed.

I also feel I should close the other Orchard card and Cap One. Unfortunately, these are the oldest accounts. But I can hold off because their fees aren't due until December. I was thinking closing one in November and the other in December, hoping they'll panic that I'm not using it and will negotiate a deal.

Any suggestions? I don't think a total of $216 in AF is worth the temporary FICO hit. The $59 for the $2000 limit card is fine with me.

[LeslieR]

Personally, I'd get rid of all but the WF, WaMu, Target(s), and HD.

Whether you want to close all of them at once, I'm not sure.

[borgman72000]

I tend to agree with Leslie. However, your average account age would obviously lower, so unless that HD card has been open at least a year, I would personally leave my oldest card open until it does hit a year old.

[stilltrying]

Wells Fargo Platinum, $2000, $59

I hadn't heard of Wells Fargo charging annual fees for the credit cards. Is this a type of Wells Fargo credit card for people who are rebuilding from troubled credit ?

[jq26]

Here's my suggestion:

1) Close all cards with annual fees unless you anticipate a large purchase in the very near future. The only reason FICOs even matter is to save money. If you are paying money to get a higher FICO, that's bass ackwards unless the short term financial pinch is outweighed by a looming purchase that will be financed at a better rate. No large vehicle, home, or other financed asset purchase in the near future? Immediately close cards with any sort of AF.

2) Now that you've been strapped down by revolving debt, you now join the rest of us CIC'ers that realize carrying balances is for chumps. What this means is INTEREST RATES REALLY DO NOT MATTER. Who cares if the apr is 32% if you always have a $0 balance? 32% of $0 is identical to 12% of $0.

3) If your credit has improved, you should open rewards cards if you like to use credit cards for convenience. Otherwise, I wouldn't open anymore cards- just close the ones with AFs.

4) Home equity lines to pay off revolving debt are NOT GOOD. I wouldn't make this a habit. You are financing yesterday's toys with tomorrow's mortgage payment. You've also converted what may have been creditor-exempt wealth and voluntarily extracted it.

[Relayer]

I hadn't heard of Wells Fargo charging annual fees for the credit cards. Is this a type of Wells Fargo credit card for people who are rebuilding from troubled credit ?

Yes, it is. The fact that they gave me $1000 CL to start and within a year upped it another $1000 made it nice. They were fair about things. I'll probably sit on the card for emergencies. That kind of limit is a nice reserve if the hot water heater or boiler goes, right?

[Relayer]

3) If your credit has improved, you should open rewards cards if you like to use credit cards for convenience. Otherwise, I wouldn't open anymore cards- just close the ones with AFs.

4) Home equity lines to pay off revolving debt are NOT GOOD. I wouldn't make this a habit. You are financing yesterday's toys with tomorrow's mortgage payment. You've also converted what may have been creditor-exempt wealth and voluntarily extracted it.

My credit needs to improve a bit more before I qualify for reward cards. However, I'm getting there. The Orchard and CapOne cards were my first credit building cards. I outgrew them, but they did carry a high APR.

That's why I got the line of credit. It was merely a cost saving issue. Interest was substantially lower. Why pay more interest?

If I owe the money, why not owe it with less interest. I can afford to pay the same total amount I paid all the other cards per month. That amount would be twice the monthly payment on my line of credit. If I pay that whole amount on the LOC, I'll have the debt paid down a lot faster. Besides, I have a ten year draw on the LOC and still have a substantial amount available should I need it. I'm not in a position to worry about creditor exempt wealth yet.

[jq26]

That's why I got the line of credit. It was merely a cost saving issue. Interest was substantially lower. Why pay more interest?

If I owe the money, why not owe it with less interest. I can afford to pay the same total amount I paid all the other cards per month. That amount would be twice the monthly payment on my line of credit. If I pay that whole amount on the LOC, I'll have the debt paid down a lot faster. Besides, I have a ten year draw on the LOC and still have a substantial amount available should I need it. I'm not in a position to worry about creditor exempt wealth yet.

From strictly a financial aspect, you have converted high interest debt into tax-deductible low interest debt. You are 100% right with that one. That's a good thing. The problem is there are other things to consider.

One is behavorial. Now your spending of yesteryear is being paid for over the next 10 years. That's not good.

Second, your LOC could and may be diminished at any time. Especially during the credit tightening that is going on.

Third, you could potentially put yourself upside down in your home. Home values are dropping nationwide- the median value drop was 7.8% year-over-year (released today). That sets you up for a short sale or foreclosure should you become unemployed.

And fourth and what I consider to be most important, you voluntarily converted unsecured 100% dischargeable credit card debt into a secured debt and attached a lien on your most precious asset- your home. If things were to take a turn for the worse, now that credit card debt that would have likely disappeared in a Chapter 7 or been paid out pennies on the dollar in Chapter 13 will be paid 100% with interest- possibly even by a forced sale on your home.

[whocares]

Heres my 2 cents for what it's worth...

Close

Orchard Visa, $400, $49

Orchard MC, $500, $49

Capital One, $500, $59

Direct Merchant Bank (DMB), $700, $0

Providian Visa, $750, $0

Target, $200, $0

Orchard will continue to report positive for a very long time, so they still count and you will not pay and annual fee.

If your credit has improved you should be able to get better cards and it looks like you have so dump them...You can always apply to HSBC in the future if you need more credit.

Some of the cards you have say previous credit problems and you only want to keep the best of the best...you don't plan on using them anymore so why pay the annual fee...just cancel them before they are due again, and see if they try and make you a deal.

You will have your new home equity loan reporting and that could raise a red flag too...so close anything you don't need, keep a few higher limit/store cards for a variety and to improve your score.

Try getting something like the sterling trifecta, it will give you open credit that you don't plan in using, but reports positive every month to all 3 CB's...and you don't have to buy anything.

Then let it simmer for awhile and watch your scores climb...

Good Luck

[stilltrying]

Heres my 2 cents for what it's worth...

Close

[...]

Target, $200, $0

I agree and disagree

The bad:

- Some people are stuck with no upgrade to the Visa or are stuck with a low limit on the charge card or the Visa

- the rewards are pretty poor, in my opinion, for Visa purchases made outside the store and pretty poor when it comes time to use the 10% off coupon unless you use the coupon for a really large shopping trip

The good:

- Target upgraded my store card to the Visa back at a time when I had six paid collection accounts that were each only about three or so years old. So, though that is just one testimonial, I would say don't give up hope on being upgraded

- if Target (esp. a SuperTarget which is like a combination grocery store and Target store) is the store where you and your family regularly do large shopping, then that 10% off could be pretty worthwhile. Plus, if you do not opt out, you sometimes will receive store coupons

- Target has the Take Charge of Education program where Target will donate up to 1% of your purchases to a school of your choice

- as your credit report keeps improving and as long as you keep your overall credit utilization low, you might have a good chance of credit limit increases on your Target Visa. I was upgraded to the Visa after having the store card for about two years. After several years with the Visa, my credit limit is around $ 3,000

[LeslieR]

The bad:

-

- the rewards are pretty poor, in my opinion, for Visa purchases made outside the store and pretty poor when it comes time to use the 10% off coupon unless you use the coupon for a really large shopping trip

Have to agree with that one - unless you are buying some huge electronic purchase for the holidays, or if as you say, it's a Super Target and you can complete a huge grocery shopping trip for a family, that 10% is nothing. I've not even used most of mine. They also expire pretty quickly.

[Bigwoodystyl]

close all of them at once. The hit to your FICO will be negligible.

Then, let the closed accounts age. Wait 12-15 months and apply for a card worth having. Wait another 12-15 months and apply for another card worth having.

By that time (24-30 months from now), you will have a 31 month HELOC and 2 good cards....

No offense, but the accounts you have now are garbage and the mere inclusion of them on your credit reports makes you unattractive for any manual (read: real) underwriting...