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I'm planning on buying a house sometime in the Winter of 2020 to spring 2021.

Currently, my credit score is about 770 and I have the following open credit lines:

  • A 2.5 year old $25,000 Prosper loan with a $12,000 balance with 2.5 years to go.
  • A gold American Express that has been open since 1998
  • A First National Bank American Express with $0 balance, $12,000 limit open since 2013
  • A Visa card with $0 balance, $4100 limit open since 2013
  • A Citibank Mastercard, $11,000 balance, $25,000 limit, open since 2013
  • A Citibank Mastercard, $0 balance, $11,000 limit, open since 2014

So, about $77,100 available of which $23,000 is used or about 30% utilizaton

I am paying down the open lines and should be finished with that by the end of the year.

I never use the $4100 Visa or the First National Bank AmEx. And, I received an offer for a $10,000 limit Visa at %9.15 from my credit union.

That is a substantially better rate than any of my other cards and I was considering closing both of the unused accounts. This would result in:

$71,000 available, $23,000 used and 32.39% utilization.

So, doing this will increase my utilization, lower the average age of my credit, and result in a hard query on my account.

I have 2 questions:

  1. Is there a way to determine how much doing this will lower my score?
  2. If I do it, will my score recover by the winter of 2020 when I start looking for home loans.

Any insight that you can provide would be appreciated.

  • 3
    Is the only reason you want to get the new card because it has a better rate? If you're paying off cards on time (as you should) and not carrying a balance, then the rate is inconsequential. – Nosjack Apr 17 at 18:50
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    Care to share how you know your current score? Is it an actual FICO or an estimated one from a third party? – JTP - Apologise to Monica Apr 17 at 19:52
  • @Nosjack I have no empirical data to back this up but I feel like I have to many credit cards. At the same time, I don't want to impact my near future home purchase. So I thought I could swap out two for one and have a lower rate to boot. – Rex Chandler Apr 18 at 17:36
  • @JoeTaxpayer I got the rate from several of my credit card lenders and I pulled my once a year report. They were all within about 10 points of each other. – Rex Chandler Apr 18 at 17:36
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Call me vain, but when it took me a ten minute phone call to get a $250K HELOC approved with no tax returns and no income (literally, we are retired), I'll wear my 850 FICO score on my hat.

You are in great shape. Be mindful of the factors that make up your score.

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Adding the new card will -

  • Lower your utilization
  • Lower your credit history (# of years average account age)
  • Add an inquiry/ New Credit

Killing an old card will

  • Raise utilization
  • Lower average account age

You really have 2 issues. The first is whether to get the new card. Yes. Of course. Lowering your current interest burden is quantifiable, you can calculate the savings, and have a relatively low interest source of cash.

The second is what to get rid of. All due respect to @PeteB I'd wait before getting rid of any current cards for the reason above. I happen to use Credit Karma to track my score, and am able to see impact from adding a card or removing one. I carry no debt, and after getting a grip on the fact that running my expenses through credit cards will show a 'balance' so I pay in full before the balance is reported, I'm still careful with which accounts I'll add or remove. As long as the unused card carry no fee, I'd wait until after the mortgage is closed. Long term, the goal should be to have only cards that provide a unique benefit. I have one with 2% cash on all purchases. Another with 5% back on Amazon. Etc.

After you have your mortgage, I'd review the benefits of each card you have, and figure out a strategy moving forward. For example, the last card I got gave me $1200 worth of miles for my first $1000 worth of spending. (The kid transferred colleges, so that card may not be useful for long, but it was worth the effort for the return I got).

  • Say Joe, you see the 30% section tastefully colored Mauve, "Amounts owed". Does it mean if you owe more or less that that is better for the score??? – Fattie Apr 18 at 13:00
  • @Fattie - the percents are the impact on the score, as if you took a high school standardized test and the section you cite counted as 30% of the final score. 30% is not the 'utilization' number, it's how it impacts the final score. It is better to owe less. 0-10% seems ideal, although my experiments on Credit Karma show 0 is best. – JTP - Apologise to Monica Apr 18 at 13:13
  • Gotchya thx - (right, I understood the structure. But the USA being what it is, for all I knew owing more may be the "better" course within that section!) – Fattie Apr 18 at 13:17
  • I think that both of the answers that I've gotten are valid and both would be good plans. I think that @JoeTaxpayer has a plan that is a bit less 'frightening' as it puts the decision off until after my mortgage. – Rex Chandler Apr 18 at 17:40
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Despite what the lender funded media suggests you should close un-utilized accounts and get that Prosper loan and credit card paid off ASAP. If it were me, at most, I would keep the AMEX and one other card. By the time you are ready to buy a home your score will be the highest possible.

This exactly happened to me and many others I have spoken with. Pay off your debt, close accounts and your score skyrockets.

However, this really doesn't matter. Anything above 730 is vanity. Your go/no go decision will all be income and down payment based.

In summary the best thing you can do, in order, is:

  1. Pay off that credit card and Prosper loan.
  2. Save a down payment of 20%
  3. Close credit card accounts
  4. Save even more
  • 1
    740 and 760 are frequently used as cutoffs for 'excellent' credit, so maybe some real benefit to getting over 730, but the point is valid that above some number it doesn't do much if any good to have a higher score. – Hart CO Apr 17 at 20:44
  • @Pete B.That sounds like a pretty good plan. – Rex Chandler Apr 18 at 17:37

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