Jennifer asks: I just read your article about closing credit cards. My question is, I have store credit cards that I never use anymore and when I did I would only put a couple hundred on and pay as soon as they came in. I don’t have a balance on any of these cards. I am asking because I am looking to buy my first home and before I look into a loan, I would like to make sure all my finances are in order. What should I do?
Are any of the store credit cards your oldest credit account? In other words, was one of these cards the very first credit card or loan you took out? If so, I would keep that card open until after you get a mortgage, but go ahead and cancel all the others now.
If not, I don’t see the harm in canceling all four of these accounts. Store cards don’t have really high credit limits, so closing them is unlikely to have a huge impact on your credit utilization. Plus, the fewer open accounts you have when you apply for a home loan, the better. Your credit score may dip slightly immediately after closing the accounts (for a couple of months), but not by much, and it should recover.
Even so, I would think lenders would rather see you have a slightly lower credit score than a higher score but a bunch of open and unused credit cards.
Good Luck,
David @MoneyUnder30
Yvonne asks: I have been working for the past year and have not yet contributed to my 401(k). The common opinion around the office is to not bother, given the current state of the market. One co-worker had lost 40 percent of what he had contributed the previous year. What do you think? Am I better off placing money for retirement in another savings vehicle? My employer does not match 401(k) contributions. [...]
Karen asks: My credit score is 572. I’m desperate to improve it, but I don’t know what step to take first. I have four companies listed on my credit report as potentially negative accounts; they’re also listed as closed. The total amount owed between these four debts is $1,900. I’m confused as to what I should do at this point. Will it improve my score to make payments on these accounts? Would it be better or worse for my credit score to take settlements? [...]
Angie asks: If my name was never on a mortgage, but was on the deed, am I able to claim the $8,000 tax credit on a house I purchased myself? I am currently getting divorced and my name was only on the deed and I am in process of buying my own home. [...]
Joanna asks: I am a 21 year old college student, graduating in a year and a half. I’ve been blessed to have gotten by so far with little debt, mostly because of financial aid and scholarships. I have about $1,500 in savings and hope to have a job soon. I’ll need to get a new car soon; my current one needs up to $2,300 to repair it.
I plan on trading in this car once it is repaired and I have a steady income, but I need to figure out how to get it fixed first. I know I need to build credit as well, so would you recommend putting the repair on a new credit card so I can make small payments until I get a job (the one I am hoping to get pays well and will allow for much larger payments once I start)? I don’t want to drain my savings to fix this car just in case something else happens, but I do not like
debt. If it does sound like a good plan, what credit card would you recommend? I only plan on using the card for this one big repair cost, and once that is paid off, only small purchases to build credit, occasional big expenses for no more than a few hundred dollars for electronics and/or possibly small trips. What would you recommend? [...]
Joe asks: Since I am a full-time student, I can use my student loans for anything. Could I buy up my credit card debt (consolidating it at a lower interest rate?) Is this a good idea? Is it legal? [...]
L asks: I will soon have anywhere from $25 to $75k that I need to store, because I’m not sure how I want to invest it yet—I may buy real estate in next six months, donate some of it in the next two months, or put some into a 401(k). How do I quickly find the bank, online or in person, where I can keep the money liquid but earn the best interest rate? I already have a BOA checking and savings account, a Schwab checking and savings account (1.05%), and two Bank of America risk-free CDS (2.50%) that will soon mature. [...]
Jackie asks: I am 26 years old. I own a condo which I am in the process of refinancing for a 15 year loan. My salary is $68K per year. I have just started working full-time in August since finishing grad school. I have 70K of student loan debt. I have no retirement savings what so ever. I do have an emergency savings with four months of expenses. Should I be saving for retirement or paying down my school loans? If I should be doing both, where should more money be going? [...]
David asks: I am 22 and just graduated from college. I was thinking about purchasing a foreclosed home for around $8-10k and using the $8,000 first-time home credit to essentially get the house for free. Will this work? I have no job at this time but I have perfect credit. I have about $3k in extra cash. I was thinking about buying a house in Detroit or Florida. [...]
M. asks: My credit union is offering a 4.01 percent APY checking account. Back in the good old days my HSBC ‘high yield’ savings account had an interest rate a little higher than that, but now it’s just over one percent. Should I move my money to this checking account?
The account has the following stipulations to earn that rate: (1) You must use your check card 12 times each monthly cycle. (2) You must get either direct deposit or use their online bill payment to pay at least one bill. (3) You must enroll in their online banking program.
If the three conditions are not met you will earn something like 0.15% APY. I was thinking is it worth it for me to move my savings over there, sign up for bill payment and pay something stupid like a cell phone bill, and just used the check card to buy gum 12 times a month and get that good interest rate for my savings account. What do you think? [...]
