Advice on credit card management
1. Cancel the Credit Pros Immediately
- Why? Credit repair companies like Credit Pros often provide minimal value and charge high fees for tasks you can handle yourself, such as reviewing your credit report and disputing inaccuracies.
- What to Do Instead?
- Check Your Credit Reports: Use AnnualCreditReport.com to get free copies of your credit report from all three bureaus. Verify that all accounts and inquiries are accurate.
- Dispute Errors Yourself: If you find inaccuracies, file disputes directly with the credit bureaus (Experian, Equifax, TransUnion).
2. Cancel National Credit Direct
- Why? Their “line of credit” system is expensive and predatory, forcing you to buy overpriced items. This type of account likely won't help your credit score in any meaningful way.
- Action: Contact them and cancel the account. If canceling will negatively affect your score (e.g., if you've already opened the account and it’s reporting), keep it open for now but avoid using it.
3. Pay Down Credit Card Balances
Goal: Bring your credit utilization under 30%, ideally under 10%, which has a significant impact on your credit score. With $4,000 in debt and a solid $140K income, focus on:
Paying off all balances next month.
Using credit cards sparingly going forward, paying in full each month.
Keeping balances low (reporting a balance of $10–$20 is fine to show activity).
4. Keep “Bad” Credit Cards Open Until After Your Move
- Why Not Close Them Now?
- Closing credit cards reduces your credit utilization limit, which could temporarily lower your score.
- Keeping them open boosts your overall available credit and improves your utilization ratio, a critical factor when you're preparing for a move where your credit score might be checked.
- What to Do?
- Once you've secured your new apartment, consider closing cards with:
- High annual fees.
- High interest rates or fees.
- Limited usefulness for your financial goals.
5. Focus on Improving Your Credit Score
With a current score of 655, here’s how to make steady progress:
- Reduce Hard Inquiries:
- Stop applying for new credit until your score improves. Hard inquiries fall off your report in 2 years but have the most impact in the first year.
- Keep Oldest Cards Active:
- Credit history length matters, so keep your oldest accounts open, even if you don't use them often.
- Build Positive History:
- Continue making on-time payments (35% of your score) and keeping balances low.
6. Optimize Your Current Credit Cards
Your mix of cards includes both strong ones and unnecessary ones. Here's how to use them wisely:
- Chase Freedom Unlimited & Amex Gold/Blue:
- Use these regularly for purchases that earn rewards but pay them off in full each month.
- “Bad” Cards (Credit One, etc.):
- Set them to autopay minimum balances to avoid missed payments.
- Don't use them actively unless you’re maintaining utilization below 10%.
7. Leverage Your Income
With a $140K income in NYC:
- Budget to Save and Invest:
- Aim to save 20–30% of your income monthly, even after paying off your credit cards.
- Contribute to a 401(k) if offered by your employer or open a Roth IRA for long-term tax-advantaged growth.
- Emergency Fund:
- Build or maintain 3–6 months of living expenses in a high-yield savings account.
Suggested Timeline
This Month:
- Cancel Credit Pros and National Credit Direct.
- Review your credit reports and pay off balances.
Next Month:
- Reassess credit card usage and keep utilization under 10%.
- Focus on saving and investing.
After Your Move:
- Close unnecessary credit cards, starting with those with high fees or little value.
Ongoing:
- Use your good cards responsibly and keep old accounts active.
Bottom Line
- Cancel the credit repair service and avoid predatory credit-building schemes.
- Pay off your credit card balances to boost your score before your move.
- Close bad cards after your move to minimize immediate credit score impacts.
- Leverage your solid income to save, invest, and avoid future debt.