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I was having a discussion with a guy who was trying to sell me a refi on a HELOC I have. He was looking at my credit report (I gave him my info as I was in the market sort of) and he told me that the number of accounts I have on my report was contributing to my average-ranked FICO score (663).

I just rejoined this board and have been reading posts and looking for detail on this issue. In the FICO links I've found through this website, they don't list "reduce number of accounts" as a way to improve your FICO score. But the guy definitely seemed to be reading something on my credit report which summarized negative flags for me "too many open accounts."

Does anyone out there know? Does too many open accounts bring my credit score down? I thought having high available credit was good for the FICO score.

The "too many accounts" are pretty much just gas cards or retail cards ala Old Navy or Generic Furniture Liquidators Extravaganza etc that I opened to just get a 10% discount on my purchase (or a really cool t-shirt) and then have never even used. Most of them just have like a $500 limit or something. Should I write and close those out? Or did this guy not know what he's talking about?

All help appreciated,
Shirtless Fool
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Shirtless1,

You wrote, Does too many open accounts bring my credit score down?

Yes, it can.

Also, I thought having high available credit was good for the FICO score.

Yes, that's probably a bigger [positive] factor than the number of open accounts...

Finally, ...he told me that the number of accounts I have on my report was contributing to my average-ranked FICO score (663).

While this may be contributing, I suspect there are more dominant issues here. Like late pays or having too much of your revolving credit lines in use or too short of a credit history. To be sure, you should probably pull your credit reports yourself. Also, a number of CRAs (such as Experian) offer useful online credit score analysis tools that can be used to estimate out how much a given factor actually affects your score. (Assuming you buy the score from them...)

- Joel
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Too many open accounts, particularly revolving accounts can reduce your credit score. I think the ideal number is 3-4 revolving accounts.

However, the reason why closing accounts is not usually recommended on this board is that it would raise your total credit ratio which usually has a greater effect on ones score. However, once you get your credit card debt under control and the debt to credit ratio is in a good place, then closing excess accounts is usually a good idea.

However, one thing to keep in mind with closing accounts, is that account history length is important. Thus, it is usually recommended to close newer lines of credit rather than older ones.

PS. I found your handle (shirtless) ironically amusing considering that you opened some of your cards for free tshirts.
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Does anyone out there know? Does too many open accounts bring my credit score down?

No one knows for sure. The list of what makes up FICO does not have anything that refers to the number of accounts. But accounts need history, so many recently opened accounts could reduce your FICO. Over time, however, the open accounts will show you can handle credit.

jk
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Does anyone out there know? Does too many open accounts bring my credit score down?

I don't know yet. I opened two new cards recently, to use their no-fee low-rate for life BT offers.

I did get Equifax's FICO Watch (TM) service on a month by month basis (3 month minimum). My FICO was at 770 before I started the show. It did go down and it did say it was for somethat that happen on the day of the score change, it was the first time one of the account report the balance (including the trasfer amount). The FICO dropped to 728 :(.

The next event happen 2 weeks later when the other account reported its first balance. Strangely it cause the FICO to go up to 745 :).

Now I know that all the balances have not been reported for this month yet. But I image that the FICO score will go up after all of those are reported, especially since I threw a snowman (large one-time payment) at one of those balances. Probably not back to the 770 though.

I suspect that some of the FICO bouncing was due to the temporary balance modifications and of course some was for new accounts.

I am not too particularly worried about my FICO that much since I don't expect a major refinance in the next few years, unless rates on mortgage go down dramatically soon (not holding my breath on that). I have until 2011 to refinance my HELOC into a traditional mortgage otherwise at that point if I haven't already refied, it will become a 15year fixed at whatever the prevailing rate is at that time.

I will try to give a report back in 6 months on how it turned out, at which time it will have included snowballing effects. At that point I will be able to answer your question.

--gr00t
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Does anyone out there know? Does too many open accounts bring my credit score down?

I don't know yet. [. . .] At that point I will be able to answer your question."

Thanks to all answers so far. Wow you Motley Fools are great. How cool is it for so many strangers to share their opinions and experiences? Makes me want to be a nicer guy. I'm working on it.

I did continue researching my question and came upon an online brochure at myFICO.com that specifically said closing old accounts with zero balances will not increase your FICO score. So there may be some upper limit for number of accounts but I bet it's tied to new accounts more than just sheer number. And it's not like I have hundreds, I have maybe a dozen.

I would still be interested in your experiment with your own FICO score GrootMeister. I will have to subscribe to one of those monitoring services and watch mine too. I will be relocating and needing to purchase a house in the next year or two and I should do what I can to raise it up before then. Thanks for the tips on that too.

My tendency is to worry about "going to the well too often" when people are being so generous but from reading through the recent history, the group welcomes just about any on topic (and even some off topic) questions and comments. I can and will dig into the voluminous reading material on these boards and the Motley Fool site too, but while I have so many smart people who enjoy helping, let me pose another question:

When is it smart to put credit card debt on a second mortgage?
The reason I wonder is while I have let my balances skyrocket to dangerous levels (I understand such behaviour is anathema to members of this board, I know I'm weak) the rates I have them on are just great. That's kind of why I let them stay there for so long was I didn't want to cash in mutual funds or stock market holdings to pay them off. One needs to consider the rate that the credit card debt is at, doesn't one?

My situation.
4,000 sq ft home worth about 280,000
First Mortgage: 195,000 blaance 3.625% 1440 payment (incl tax and ins)
HELOC: 45,000 balance, 9.5%, $400 payment
CC 1: 15,500, 3.9%, $300
CC 2: 13,000, 2.9%, $400
CC 3: 13,000, 6.9%, $300
CC 4: 5,000, 4.9%, $100

That rate on the HELOC is tied to the prime rate so it keeps going up. But when I was shopping around for fixed second mortgages, the rate wasn't any better. The only advantage I would have is I could increase the amount of access I get to the equity.

I was wondering what the consensus is here. If it's the smart thing to do to refi the HELOC and move the credit card debt to a larger HELOC or 2nd mtg. Or should I stay where I am at the low rates and just work really hard to get my balances down?

Thanks again,
Shirtless1



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When is it smart to put credit card debt on a second mortgage?

Not when your current CC rates are lower than the rate you'd get on a 2nd mortgage. Not when you are planning to sell the house in a year to relocate. You will very rarely hear anyone on this board recommend that you move debt from a ccard to a HELOC. Leave the balances on the cards, and work like mad to pay them off.

Are the balances on those cards near the credit limit? That may be the reason for the low FICO. IMO you should be more worried about the credit card debt than the FICO score. Have you stopped using the cards?
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When is it smart to put credit card debt on a second mortgage?
The reason I wonder is while I have let my balances skyrocket to dangerous levels (I understand such behaviour is anathema to members of this board, I know I'm weak) the rates I have them on are just great. That's kind of why I let them stay there for so long was I didn't want to cash in mutual funds or stock market holdings to pay them off. One needs to consider the rate that the credit card debt is at, doesn't one?

My situation.
4,000 sq ft home worth about 280,000
First Mortgage: 195,000 blaance 3.625% 1440 payment (incl tax and ins)
HELOC: 45,000 balance, 9.5%, $400 payment
CC 1: 15,500, 3.9%, $300
CC 2: 13,000, 2.9%, $400
CC 3: 13,000, 6.9%, $300
CC 4: 5,000, 4.9%, $100


It is rarely to never a good idea to refi to put CC debt on a second mortgage. I can name about 5 reasons, but I'll name just one - you're trading unsecured debt for secured debt. Meaning that its now backed by your house. If you fail to pay at some point, you could lose your home.

The one and only reason *to* do it, is for lower rates, which is not your case at all.


However, you are still living a quite leveraged and dangerous life. While this situation is alright when things are going well - but it can be life ruining when they don't.

If you lose your job, you may be unable to make those payments. Furthermore, if your lost your job while the economy as a whole is poor, your investments may have lost significant value - which will leave you selling at the worst time - at the bottom.

If you start missing payments, your interest rates on those cards can skyrocket to as high as 20 to 30%. In fact, due to a universal default clause, missing a payment on any of the cards can cause them all to do that.


To put it another way, what you've done is taken a loan out from your credit cards to buy stock. There's absolutely no reason to do that. You're borrowing from one of the most consumer unfriendly sources in order to invest in a volatile investment. If you *really* want to invest someone else's money, get a margin account, which is not subject to such horrible treatment.


Finally, are you living within your means while doing this? Do you even know? Or is it very possible that the money you've been spending on your cards exceeds your income. Will your balances continue to increase more than what you put into your invested? Will your minimum payments continue to increase along with them until you begin having trouble meeting them? And is that when you'll lose your job?


You really need to rethink the consequences of your actions in anything other than the rosey scenario. And while you're at it, add up the finance charges, even at those low rates, and see just how much of your money the credit card companies have been taking over the last several years.
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I did continue researching my question and came upon an online brochure at myFICO.com that specifically said closing old accounts with zero balances will not increase your FICO score. So there may be some upper limit for number of accounts but I bet it's tied to new accounts more than just sheer number. And it's not like I have hundreds, I have maybe a dozen.

Only a chart showing FICO values for various credit histories would explain what they mean. Closing old accounts has an effect on your average age of accounts, but if they have had no activity, i.e., old, then there is out-of-date payment history and no way to rate the account.

The generally thrown around number of 4-6 accounts represents the typical number people can manage. But with checkfree and other web services, one could manage dozens of accounts. The internet could demonstrate a weakness of FICO and the need for the new Vantage score.

jk
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The generally thrown around number of 4-6 accounts represents the typical number people can manage. But with checkfree and other web services, one could manage dozens of accounts. The internet could demonstrate a weakness of FICO and the need for the new Vantage score.


Just because it is possible, it is not necessary or that a "normal" responsible person would. The more accounts, the easier to miss payments and have fraud or incorrect transactions problems. The reason I closed all of my store accounts was because multiple accounts had problems in the same month.

Debra
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Shirtless,

If your credit report shows no late payments, then a possible negative is that you have "too many" accounts. As for how many is too many, I've seen 3-4 tossed around, but there are reasons to have more than that number, such as like when the store you like to shop at gives you a lower price for using "their" card (department stores are very common for this) or special financing (Best Buy, Circuit City, Home Depot, Lowes, etc) where you can postpone paying for your purchase while the money's sitting in your bank account earning interest.

I'm not a fan of gas cards these days because usually they only offer a discount for the initial application and use, but after that there's no real benefit, IMHO, because if the station accepts their own branded card, they almost surely accept Visa/MC/Discover/AmEx. But, I will admit that I did recently open a Shell gas card for their $25 gift card promotion. How long I keep it remains to be seen. (usually I use my AmEx Blue Cash)

If you have card(s) that don't offer special pricing or financing after the initial card application, AND you don't shop there regularly, I'd consider closing the accounts. Not purely for the FICO, but just because it's easier to track.

- Lan
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