Ok, in hopes of buying a house, I talked to my financial planner about getting my finances in order, which I thought they were, but not to her level, apparently.
My sister just got married, so as a gesture of brotherly love I bought some items for the wedding (flowers, limo, photographer, etc.) I had originally put it all on my credit card because I wanted the airline miles. My rate is pretty good for a CC, but she told me that I can consolidate all that debt into a personal loan at a much lower interest rate. I was going to pay all this debt off at once, but with Christmas coming up (and half my family’s birthdays, plus my brother-in-law and his siblings – who I now hang out with a lot now, etc.), it just made more sense to pay that off later as the bills come due, just in case I need cash for whatever reason (my emergency cash is in my savings account which I haven’t touched ever).
Anyway, now I have a loan with a 7% interest rate (which would’ve been lower had I a house), one credit card with no debt (I plan on cancelling it) and one with 18% debt (to build my rating or keep it up).
Does the loan hurt my credit rating? Would cancelling the card (with no balance) hurt my credit rating? I was thinking of replacing it with a card that had more features, like cash back (which I think are way better than airline miles), like the American Express Blue Card (there might be a Visa/MC equivalent, but the Blue Card looks cool 
)
(I want to be in prime shape, financially, for when I buy my house. When I see my savings, I just don’t want to touch it. I may even try 97% financing.)
If you are considering a home purchase in the near term, I suggest:
- Do not take on any new debt (excepting the mortgage itself) until the day after closing on the house and finalizing the mortgage. Do not apply for any new credit of any kind. If you can at all avoid it, don’t let ANYONE pull your credit, even to get a cell phone. Do not close any accounts either unless there is a very good reason.
If you’re not absolutely certain that your mortgage is completely and wholly finalized, contact your mortgage broker or banker and ask “Can I apply for new credit now that the mortgage is final?” Also consider calling your realtor and asking the same question.
- Try structuring your debt so that you have less than 50% of any given revolving credit line is in use.
Revolving lines of credit include credit cards. They also include personal loans where you are allowed to continue drawing new funds out. I suspect home equity loans count too, if you can continue to draw against them.
- Remember that it takes new information anywhere from 1 to 120 days to make its way onto your credit report. Some information never makes it to your report; that information never gets reported, or is placed on the report of someone else.
PS- If that house purchase is not in the next 12 months and you don’t have to, keep your balance off that high-interest card.
Carrying a balance from month to month DOES NOT build credit in the long term. The closest it can do is keep your % of balance used in the right bracket, but that’s really a petty difference and in some cases won’t help at all.
Unless the card with no debt has an annual fee, do not cancel the credit card. Keeping the card open will help your overall utilization and average age of accounts, both of which impact your score.
If the card has an annual fee, do not cancel until the month before the annual fee is due. Consider calling the card issuer to see if they’ll waive the fee.
Ok, I’m confused. I thought I read on this board and other places (like MSN) that the quickeest way to build up credit is to carry a balance between 20-30% on two credit cards. I dropped my percentage to 18% because that’s a lot of money/credit to be debt servicing at 12.99%. So is it a function of credit available relative to income that most affects credit rating, and not the number of cards one has? Does the personal loan hurt or help? I’ve been keeping a balance for almost a year now, and once I get approved for a loan, I’ll just pay it off.