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My wife and I currently have a few credit cards that we don't use, but there's another that we'd like to get, but I'm not sure if I should close those first and wait a month or so before applying for the other, or just apply for it and close the others at the same time. I'm mostly concerned about limiting the credit limit we get on the new card...

We have:

  • Local bank credit card - $1000 limit - 1st cc I got several years ago; limited cash back/etc. options; probably the longest credit history I have on my report
  • GEMB credit card - $3000 limit - got as part of a 0% finance promotion (paid off in May), haven't used since
  • Clothing store loyalty card - $1000 - use $100-300 from time to time and get good deals for having it, so not looking to close this one
  • Chase Freedom - $3300 limit - use for everything; alerts set to pay off if we hit $1000 so we don't get above 33% (overall) utilization (and to a certain extent to distribute the bank withdrawals a bit more than pulling $2k+ at one time)

What I'd like:

  • REI Visa (US Bank) - I think we'd qualify for the signature version (w/ no set spending limit), but if you apply for it and don't qualify, you're automatically 'considered' for the 'platimum' version, which would be only slightly less ideal

If it matters, we also just got a mortgage in May that was pretty-well below our 'maximum approved amount' - I know it helps to have different credit types to some extent... (though I'm really more focused on the new card than my credit score in this instance)

So...

Is it advisable to just apply for the REI card (since the others are contributing to overall low utilization and longer history), or close the GEMB (and local bank card?) to reduce the total 'credit availability' (to theoretically open up more space for the REI)?

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2 Answers

up vote 3 down vote accepted

If you're looking for cause-effect, applying for another card won't matter at all if you're not paying any interest, or not looking to get another installment loan for which the rate you get depends on your credit rating.

If you are looking to get another installment loan, then having more credit at your disposal might hurt a small amount. I wouldn't want to cancel your oldest card. The GEMB card looks like a good candidate if you want to cancel because you're not using it, and it's a relatively new card.

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You want to have 2-4 credit cards, with a credit utilization ratio below 30%. If you only have 2 cards, closing 1 would reduce your credit diversity and thus lower your credit score. You also want at least 2 years credit history, so closing an older credit card may shorten your credit history, again lowering your credit score. You want to keep around at least 1-2 older cards, even if they are not the best.

You have 4 cards:

  • Local bank credit card - $1000 limit - keep because it is oldest card.
  • GEMB credit card - $3000 limit - what is age?
  • Clothing store loyalty card - $1000 - least useful card
  • Chase Freedom - $3300 limit - highest limit, keep, stay below 30% utilization

But having 2-4 cards (you have 4) means you can add a 5th, and then cancel one down to 4, or cancel one down to 3 and then add a 4th, for little net effect. Still, there will be effect, as you have decreased the age of your credit, and you have opened new credit (always a ding to your score).

Do you have installment loans (cars), you mention a new mortgage, so you need to wait about 3 months after the most recent credit activity to let the effects of that change settle.

You want both spouses to have separate credit cards, and that will increase the total available to 4-8. That would allow you to increase the number of benefits available.

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