Oh, I keep American Express out of sentiment, Chai. It's the first card I ever had. Also, I bought an Experian credit check some years ago. Canceling a card was a plus, in the comments. So was the average length of time a card was held, and that one goes way back. Also amex issues the optima card, which needn't be paid off monthly.
Never bought commercial paper, but I've pedalled a bunch of it, in the automotive, equipment, and real estate fields, and I've had much occasion to talk - sometimes at length and in detailed specific - with commercial paper buyers. Things to which commercial paper buyers pay great attention include documented ability to pay (income reliability and debt-to-income ratio), consistent paid-as-agreed history ("lates" - particularly if there is a pattern of them, or if any are 60 days or greater - are strong negatives), comparable previous credit (satisfactory performance over the life of a credit contract of similar dollar value), and potential credit exposure. Now,what is potential credit exposure? Essentially, that equates to the aggregate of all available credit the prospective borrower currently has - the credit-limit amounts of that prospective borrower's open revolving credit accounts irrespective of account balance or account payment performance history. A commercial paper buyer will look at a relatively large number of credit cards, even those with zero balance, as a potential negative, balancing the prospective borrower's ability to support all available debt as well as current debt-in-effect plus the debt-load increase attendent upon the immediate proposed transaction.
In other words, having a whole lotta credit cards or other revolving credit accounts, even with little or no current balance on those accounts, can negatively impact one's ability to secure additional credit, paricularly long-term, high-dollar credit. If one does not have a relatively large, stable income, one is better off with a only couple major credit cards and mebbe a student loan, a car loan or lease, and a previous mortgage than with a walletfull of open plastic.
Oh, and a history of "churn", repeatedly rolling large balances from an established card or account to a newly-opened card or account, does not reflect well on a prospective borrower in the mind of commercial paper buyers, either.
hmmmm....but take them a long time to discover the churn...I've been doing it 15 years.
Not necessarilly, Chai - I'm sure its been noticed, but it is only one factor, weighed and balanced with others. Its merely not a positve; it need not be a deal-breaker, might or might not be a negative, depending on overall consideration of the body of credit history pertaining to the individual prospective borrower at examination.
Chai,
If you are pulling this off, it is impressive. And, I love hearing about someone using this corrupt system to get ahead.
Hopefully you have savings equal to the debt you are running that you can make liquid in an emergency. If this is the case, then go for it. The risk is that in an emergency, you don't have the money to "churn"-- and the industry "chooses" this moment to not offer you good rates any more. Many Americans are trapped into high interest debt this way.
I think for most Americans, the importance of FICO is greatly hyped. The marketing departments of a hundred credit companies don't hurt this mythology.
So, I say screw 'em. If you can use their money for free-- why not. Just be careful because you are playing with sharks who will turn on you in a second if they get the chance. If you are covered, go for it.
Good advice, ebrown.
Another thought occurs - perhaps of limited practical value to some - it can be advantageous to cultivate and maintain a close relationship with a smaller, independent, local bank/banker. This does, however, have both an upside and a downside.
On the upside, a simple, informal phonecall to my banker will get me just about any amount of credit I might want, no questions asked, and instantly. On the downside, thats precisely the downside, too.
I agree about the small local banker, Timber. I won't take a mortgage with anyone who doesn't broker their own loans or one who will sell my mortgage.
When Mr B and I bought this house we were trying to sell our other home. We asked the bank to let us carry both mortgages, without a bridge loan. It put us above the housing debt ratios which would have meant an instant no from most mortgage lenders. Our banker approved the new mortgage simply because we had a history with his bank and he knew he wasn't going to try to sell our loan.
