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MM(19) Credit Score

May 21st, 2023 at 12:56 pm

Take 'one size fits all' financial advice with a grain of salt.

Probably the #1 question I get about credit card churning is "Doesn't that destroy your credit score?" ~ that we close the cards when we are done using them.

It does absolutely nothing to our credit score.  It appears that 90%+ of our credit score is just always having paid on time.  & utilization otherwise seems to be the only thing that has any bearing on our credit score.  If I apply for 3 new credit cards tomorrow (new inquiries) and close most of my old cards tomorrow, my score might(?) drop from 840 to 830?  This doesn't mean anything.  & honestly, I've never even noticed a 10 point drop.  But admittedly, I am not staring at my credit score or worrying about it.  (I watch my credit score, but I don't look at it every single day).

Also, it doesn't matter if your score is 750 or 850.  You get the same exact results either way.  750+ is basically a perfect credit score.  Life is exhausting enough as is.  No need to spin your wheels on things that don't matter. 

I've literally had an average one year of 'open credit' and a 800+ credit score at the same time.  When we last refied our mortgage.  *shrugs*

Note:  Good credit stays on your credit report for 10 years.  This is the *how* you can have all new credit and still have a very strong credit score.

The equation obviously changes if you are just starting out, trying to build up a low score, etc.  

Well, you would think.  This is the point of this post.  

I opened a new card for DL(17) a bit ago.  MM(19) was able to get his own credit card and I have way too many credit cards.  So I closed the card that I had opened for MM(19) to use during his high school years.  I think *5* credit cards is more than enough to keep track of, and I just no longer had any use for this card.

I was cautious and did wait until MM(19) was able to get his own credit card with a decent credit limit. 

MM's credit score has been 770-780 since he applied for his own credit card when he turned 18.  Before that I had added him as an authorized user on my Target card and on the card I got soley for him to use. 

This ended up being genius because I never keep cards open long term.  Just keep them open if I am still using them.  I put him on the Target card for convenience, but it just also happens to be the oldest credit card that I have.  10+ years!  Also, the card I got specifically for MM(19) wasn't showing up on his credit report when he turned 18.  But the Target card was.  When I realized, I added DL(17) to the Target card too, to give him a credit boost.

When MM turned 19 he applied for a new credit card.  I believe they only gave him a $1,000 credit limit and I didn't find that to be too practical.  But between the $500 limit credit card & the $1,000 limit credit card...  I told him if he charged anything large like auto insurance, to just pay off immediately.  That utilization can hit your credit score pretty hard if you aren't careful.

Interestingly, I was trying to refresh my memory and his credit card is showing a $3,500 limit, on his credit report.  !!  If that's correct...  Phew!  I've been waiting for this "credit card companies are insane" to kick in so that it's more useful for him.  He can now charge up anything and everything without fretting about the utilization.  It's just much more convenient and useful.  But this is insane.  That they are giving a kid with $5,000 annual income a $3,500 credit limit.   ???  It took a little bit of time, but I guess we found the point where it gets insane.

I will have to ask him if he had noticed the credit increase, or confirm with him if that is correct.

So, where was I?  MM(19) started with a 770-780 credit score.  After he got his own credit cards and had a workable credit limit, I shut down the card I had gotten for him to use during high school year.  I did not anticipate him using credit in the near future.

And...  His credit score dropped from 780 to 770.  & then the next month it went back up to 777.

There you have it.  I was surprised and irritated by the caution I took waiting to close this account that no one was using.  🙄  Even for the very young credit, the card closing didn't amount to a hill of beans.

Full disclosure:  MM has 100% on time payment history, 5% credit usage, 3 credit card accounts, 5 year average credit age and 1 inquiry.  (He has 2 credit cards + is still the authorized user on my Target card).

The only advice he is being given is to change his mix of credit.   It's the only thing he can do to improve his score at this point (per credit karma).  Adding an installment loan. I really don't see the point of doing 8%+ student loans (plus 1% up front fee).  It's moot because wouldn't touch these scammy loan servicers with a 10 foot pole.  Before interest rates rose significantly, I more considered these loans on the level of payday loans.  Who knew they could get any less appealing, but the high interest rates aren't helping.  & for a car loan, he's probably going to need a co-signor because of his income.  Meh.  I'd rather loan him money at very low interest rates if he does need a loan.  But I don't anticipate him *needing* to borrow any money.   

Like us, he will probably add an installment loan when he gets a mortgage.  

Edited to add:  I confirmed with MM(19) that his credit limit (on the one card) is now $3,500.  He hadn't noticed.

Second edit:  Re-reading this post, one point to add to clarity.  MM applied for his own student card when he turned 18.  & then when he was 19 and had a job, I had him apply for a regular Chase rewards credit card.  So that is why he has two cards.  The student card still only has a $500 limit and is far less useful.   He can probably just convert it to a regular rewards card (with our CU) at some point when he has more income.

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