Which credit cards look better on your credit report?
Let me start off by saying I love this website! I have a couple of
questions. I have been told that certain credit cards (e.g. Capital
One, Cross Country, and others like those) do not carry a lot of
weight on your credit report. I was always under the impression that
all credit cards carried the same weight. What is the truth?
question concerns paying them off. I would like to pay off my credit
cards. Should I just pay them off and try not to
use them? (I have tried this before and failed). Or should I just go
ahead and cancel them.
I am really getting sick and tired of credit
cards and I want to stop using them because they put too much
pressure on me. Please advise.
Great questions! It certainly does
make sense that some credit cards will look better on your credit
report. However, I would think that it depends on who's looking. I'm
sure that each bank has their own criteria for deciding how to
"score" your report based on its contents. (FYI, you can get a
free copy of your credit report each year from
In fact, my suspicions of this are
proved correct after speaking with Norm Magnuson, President of
Public Affairs, from the Consumer Data Industries Association.
Scott: "Are there certain
types of credit cards that look better on a credit report."
Norm: "The lenders make
Scott: "Can you tell if a
secured or unsecured credit card is listed on a credit report, and
does that affect your score?"
Norm: "No, they don't
designate secured or unsecured."
Scott: "So all lenders
have their own criteria."
Norm: "Oh, absolutely. All
10,000 lenders develop their own underwriting criteria. Some,
because of their interest rates, and other factors, are willing to
provide cards or loans to consumers that might be less credit-worthy
than others. With all of the competition out there, you ought to shop
around for credit."
Scott: "That's a fact! The
only way these banks are going to get new people is to steal them
from other banks."
Norm: "They do that by
providing better terms and rates."
Scott: "As far as your
credit report goes, is it better to have higher limits or lower
Norm: "Limits don't matter
as much as utilization rate. Percent outstanding to credit limit.
The ideal is about 33% to 34%."
Scott: "Do you mean ideal
Norm: "Yes. The less
credit you have outstanding, relative the limit, the better off you
As far as paying off your credit card
goes, that's always a good plan. I do, however, recommend that you do
not close your accounts. You may need them to make the banks
compete for your business in the future. You don't want to be at the
mercy of any one bank.
I do understand that you've tried to
do that in the past. That is, keep your zero-balance cards and not
use them. You mentioned that this failed. I'm guessing you mean that you continued to spend on those credit cards after they were
paid off. What I do is put all credit cards with a zero balance in a
file. I call that file the "credit-card graveyard," where
I leave cards that are not intended for use. This helps avoid any
sort of impulse purchasing. Later, if I decide that I really do need
to use one, I just "exhume" a card.