December 30,2008
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Dormant Credit Card Concerns, Pt.4 –
– Wake up – those dormant cards.Still in the future planning stage, we're talking about payment history:
- Payment history (35%):
Again, this has the greatest effect on your
FICO Score at thirty-five percent. Always
paying credit cards on time over a long period
helps a lot. Conversely, missing a payment
hurts a lot.
- Debt ratio (30%): This could
have a great effect on your situation if you
only have one or two credit cards and your
credit limit is lowered for some reason. The
two most common reasons are when the lender
simply decides to lowers your limit. The other
common way is when you only have a few credit
cards and one or more goes away. It used to be
that using up half of your available credit
was fine. Not so, any more. The FICO standard
has lowered the healthy limit to only
one-third capacity (33%). So, if you have two
credit cards, each with a $10,000 limit and
you owe $5,000, you should be just fine (25%)
debt ratio. But if one card is dormant and the
lender closes the account for non-use, now
you're in trouble. You're suddenly found with
a 50% debt ratio.
This carries a 30% ‘weight factor' so it can be serious. Same thing happens when the lender simply lowers your limit substantially. When you have five credit card accounts in good standing, this is far less of a threat. Just be sure they don't go dormant. Use each card at least once every six months. Dormant cards are being whacked left and right by the millions without warning.
- Credit history length (15%): This could the most important area where dormant credit cards are concerned. Because they're usually the oldest cards you have, it's worth the while to protect them. The longer you keep a card in good standing the better, with emphasis. These old cards may be hiding in a sock drawer somewhere, forlorn and lonely. I have a 1995 and two 1998 accounts which haven't been used in ten years. My credit report says they're still in good standing as of this month. We need to get out and use our oldest cards for a single transaction soon I've already had four accounts closed on me for non-use (so old, I can't even find the cards, today). Important!
- Payment history (35%):
Again, this has the greatest effect on your
FICO Score at thirty-five percent. Always
paying credit cards on time over a long period
helps a lot. Conversely, missing a payment
hurts a lot.