Does consolidating credit cards affect credit score
For example, if your credit card has a ,000 limit and you spend ,000 this month, you have utilized 60% (3,000 ÷ 5,000 = .60) of your available credit. However, if you have three credit cards, each with a ,000 credit limit and you spend the same amount this month (,000), you have used only 20% of your available credit (3,000 ÷ 15,000 = .20). Unfortunately, if you close two of those cards you effectively force yourself above the 30% credit utilization line.However, because the cards are frozen, you should not be accumulating any more debt with them.This is the second most important category in determining a credit score.Owing money on a credit card is not a bad thing, as long as you pay down the debt every month. More than 65% of credit card users carry a balance from month-to-month.It makes you look desperate for money and unreliable in the eyes of lenders.You want to limit new credit applications, especially when you need to apply for a car or mortgage loan.If you have a mortgage loan, auto loan, credit cards and you are paying them all on-time every month, this area of your credit score will be well taken care of.
Most debt management programs ask you to close all but one credit card account and that could have a temporary negative affect on your credit score.However, if the one card you keep has been open for a decade, the impact should be minor.Consider this your “legacy card.” Just make sure it doesn’t have an annual fee.About one in five credit card users only pays the minimum.Not paying down the balance has a negative effect on your credit score because it increases your credit utilization.
Use it occasionally, pay it off immediately and reap rewards for your credit score.