If your credit's all grown up, ditch that $300 'starter card'
Don't be shy about leaving your low-limit first card
By Kevin Weeks
Dear Credit Wise,
I'm 25 years old with a credit score of 761. I opened my first card when I was 18 -- it was one of those $300 starter cards. As I got older and my credit score and history got better, that $300 went up to $1,000 and stayed there. Because of the low limit and my score and history I opened up two more cards and no longer use the now $1,000 dollar limit card. I also find myself getting mail offers for better cards with higher limits. My question is, as people get older and their history and score get better, what do they do with their first credit cards? Thanks -- Dan
It seems you have been doing a great job handling your credit over the past seven years. Scores top out at 850, so you are in the good to very good range at 761. I am not surprised that you are getting offers for better cards with higher limits. But should you take advantage of them? Maybe, maybe not.
First, let me answer your question about what people do as they get older with their first credit cards. You said your starter card began with a $300 limit and then went up to $1,000 and stayed there. This means that your credit limit more than tripled, so you must have handled the account responsibly. One factor in credit scoring is oldest credit lines, but don't pay attention to those who say you'll hurt your credit by closing your starter account: Even if you close it, the record of it remains on your credit report for 10 years. By then, you will have a decade's worth of new credit data showing how you've handled credit responsibly.
Still, it is not necessarily a bad thing to have an open account with a $1,000 credit limit that you don't use regularly, unless you are paying an annual fee for the card. If you think of this card as an emergency backup and pay off any charges you make monthly, it might be wise to leave it open. You don't say this, but it could be that the reason you have stopped using this card is because it has a high interest rate. You won't have to worry about interest if you pay the card in full each month by the due date. You will need to use it occasionally to keep the creditor from closing the card or reporting it as dormant. And never, ever pay late. Building good credit does take time, but it is amazing how quickly your credit score can drop with one or two missteps.
As for the offers you are receiving for higher limits, you should remember that just because you get an offer in the mail does not necessarily mean you will be approved. All offers include a disclaimer that says that your application and your current credit report will be the deciding factors in the offer for which you are ultimately approved. You should also be aware that applying for new credit cards may affect your score. Too many credit inquiries can signal trouble to creditors: Each application saps away a few points from your credit score, and too many inquiries likely will affect your score.
Do your homework on the cards you are considering and narrow it down to one or two. If you get the offer or offers you hope for and want to purge a card, consider another card and not your oldest one. No matter what, don't be tempted to charge more just because you get a card with a higher limit. Your goal should be to never carry a balance and pay all charges in full every month. Keep your balances as low as possible and your payments on time and you're certain to see your score continue to increase.
Be wise with your credit!
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
Published: March 21, 2015
- If health problems strike, ask for hardship rate reduction – Avoid a settlement if you can; its credit score impact lingers ...
- Before you charge, have a plan to pay off your debt – Yes, you can buy now, pay later. But know the consequences ...
- Deciding whether to settle a credit card debt – Do you have a lump sum, and are you ready for a credit score hit? ...