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10 tips on managing your credit cards

The fastest ways to send your credit scores skyrocketing — or make them crash and burn — all have to do with credit cards.

Use them well, and you’ll win the battle for higher scores. To help you out, here’s a rundown of the intel you need:

Q. Should I open a new credit card account?

A. Not if you can avoid it. Opening a new credit card drops credit scores for many, many months. It’s only safe to open an account if you are not financing a car or buying a home within the next 18 months.

Q. I don’t have any credit cards. Should I open an account?

A. Yes. Credit cards and how they are used are important to having high credit scores. Make sure you open only major credit cards — Visa, MasterCard, American Express or (last choice) Discover.

Q. I can only get credit card limits of $300 to $500. Does that help my scores?

A. No. Lower credit card limits do not help scores in any way that I can see. That is why I recommend against credit card brands such as First Premier, Capital One, Household, Orchard Bank and Providian. Get limits of $1,000 or, preferably, $2,500 or more, if you can.

Q. Should I get any store-specific credit cards?

A. No. Absolutely not. Store cards are bad for credit scores, period. Store credit cards are considered lower-quality credit by credit-scoring software, and they create lower scores.

Q. So should I close my store credit cards?

A. Maybe. Do not close a store card or any other credit card if it is your oldest open credit card. An important part of credit scores is the depth of your credit history. Your oldest open account creates that depth. If you have lots of cards, close just one a month — closing credit cards too quickly does serious harm to credit scores.

Q. Should I ever close a major credit card?

A. No, I don’t see any reason to do that. It won’t help your scores to have less credit available on credit cards. Some of the highest credit scores I see are people with four to 20 open major credit cards. Four is enough; again, never close the oldest one.

Q. What if I don’t use all these cards?

A. To have top scores with credit bureaus, you need to use each card for a purchase once every six months. If you don’t, your scores will drop, and you’ll risk that the credit card company will close the account for lack of use. That will cause a bad mark on your credit called “account closed by credit grantor.”

Q. Can I get a lower rate from my credit cards?

A. Yes, if you ask. Call the company and just ask, and do it often — especially if you have not been late on a payment for a couple of years. If you don’t get what you want on the first try, call again the following month. Credit card banks are businesses, and they have specials, too.

Q. Can I get a credit limit increase?

A. Yes, and you should try, especially if your limit is under $2,500. Call the company and ask, but if you are turned down, don’t stop there. Ask for the customer service representative’s supervisor; if you don’t get satisfaction from the supervisor, ask to speak to the supervisor’s supervisor. Keep in mind that one of the huge decision factors is your total household income. They’ll ask, so be sure you know it. Another factor is your credit history with that company, and also your overall credit history.

Two of my credit cards were from different companies, but last spring, one company bought the other. At that point, I decided I wanted another brand of card. I called American Express to get a new card but was turned down because of my six-year-old bankruptcy. So I went up the chain of command to the top decision-maker. Next thing you know, I had talked my way into a card with a $25,000 credit limit and 0 percent interest for 18 months. Victory was mine.

Q. Is it true that having lower balances helps credit scores?

A. Absolutely. Except for Providian and Capital One, the following guidance applies:

• Keep your monthly balance below 48 percent of the credit limit for best scores. The higher the percentage of your credit limit that you use, the lower your credit scores.

• Going over your limit hurts your scores.

• Adding 25 percent or more to your existing balance hurts your scores. That includes charging $25 on a card that has a $100 balance.

• Paying off credit card balances rapidly and dramatically helps your scores.

Dave Peters is a semiretired loan officer and credit repair specialist. He is a trustee of the nonprofit organization Credit Learning Systems, which teaches college students about credit and debt. He is the author of the book “How Credit REALLY Works” and a guest on radio shows nationwide. E-mail him at creditmatters@atpco.com.