Credit card questions.

[Candini]

I recently applied for a Scotia bank MasterCard, was approved. (Swag bucks had some deal, upon approval receive 2500sbs.)

To add to my collection as I can call it, I will now have 5 credit cards under my name.

4 of them have $0 Balance. I don`t use them.

I was told that if you have multiple credit cards and you apply for a mortgage, the bank will look into see what cards you own/debt you have, and they deduct (How much credit limit you have on each card) that from the mortgage you are trying to get?

I was also told that if you cancel credit cards your credit goes down?


Thanks in advance for any answers.

[Natalka]

To establish credit, you should be using a card and paying the balance in full every month.

http://gailvazoxlade.com/blog/archives/3128

[Candini]

Oh Natalka you goddess! You always have all the answers

[tasha313]

It goes by your rate of endebtment (not sure that's how you say it in english)

For example you have five cards and 4 at 0 your rate of endebtment will be somewhere around 10-15% depending on the amount on the other card and if you have for example loans , or a car and such .

You don't have to pay your cards in full every month , as long as the minimum payment is made on time every month your card will be considered R1 (r9 being the worst) . When you have a low endebtment rate and wtv you do have is r1, you're in fabulous business for a mortgage .

I don't think they deduct the amount available on your cards, that wouldn't be fair . If you have say 5 cards with 10 000$ limits but 0$ balance, you'd basically be punished for having great credit and knowing how to manage it. And yes canceling cards bothers your credit rating.

[Candini]

It goes by your rate of endebtment (not sure that's how you say it in english)

For example you have five cards and 4 at 0 your rate of endebtment will be somewhere around 10-15% depending on the amount on the other card and if you have for example loans , or a car and such .

You don't have to pay your cards in full every month , as long as the minimum payment is made on time every month your card will be considered R1 (r9 being the worst) . When you have a low endebtment rate and wtv you do have is r1, you're in fabulous business for a mortgage .

I don't think they deduct the amount available on your cards, that wouldn't be fair . If you have say 5 cards with 10 000$ limits but 0$ balance, you'd basically be punished for having great credit and knowing how to manage it. And yes canceling cards bothers your credit rating.

Super! Thanks

[alicia]

Yeah, Tasha was mentioning "rate of endebtment" was talking about the credit utilization rate (how much you owe compared to your limit). And if you don't need all those credit cards, you can close a few of them - yes it initially dings your credit but if you don't plan to borrow in the next year or so, I think it will be fine because it rebounds quickly.

[trishka]

You don't have to pay your cards in full every month , as long as the minimum payment is made on time every month your card will be considered R1 (r9 being the worst) . When you have a low endebtment rate and wtv you do have is r1, you're in fabulous business for a mortgage .

You can pay only the minimum, but you really should pay the full amount. If you only pay the minimum, you're still paying interest on the full amount of your bill. If your bill is $100 and you pay the minimum, let's say $10, you are still paying interest (usually at a 20% rate) on the full $100, not the $90.

Cancelling a card will only affect your credit for a time, it's not permanent, like alicia said. If you never use them and have no need for them, I would cancel them well in advance of applying for a mortgage or loan.

[tasha313]

You can pay only the minimum, but you really should pay the full amount. If you only pay the minimum, you're still paying interest on the full amount of your bill. If your bill is $100 and you pay the minimum, let's say $10, you are still paying interest (usually at a 20% rate) on the full $100, not the $90.

Cancelling a card will only affect your credit for a time, it's not permanent, like alicia said. If you never use them and have no need for them, I would cancel them well in advance of applying for a mortgage or loan.

Financially wise yes it's WAAAAYYY better to pay more than the limit, i'm just saying for credit rating, whether you pay the minimum or the whole thing doesn't change a thing.

[debrar]

Here's how owning more than one credit card affects the amount a 'lender' will lend you.......each credit cards credit limit is factored in as your 'liability risk'...which means, if you have 4 credit cards with a limit of $10,000 each, the bank sees that as a credit liability of $40,000 against you, which they factor in to what amount they're willing to lend you. The bank/lender doesn't care that you don't use them, they see that you have the 'potential' to use them as you see fit. You can't just cut them up, you have to actually contact the credit card company to have them cancelled. Especially if you plan to borrow money in the near future. Having a couple of cards is no big deal, if you make your payments on time.

I wouldn't worry too much about the credit rating...you can cancel cards that don't have a long credit history, which won't affect anything. The payment and balance history is what is important on your credit score, and is what lenders are looking for.