Question from Terri:
I have several credit cards to children's clothing store. My children are grown now, and I no longer shop at those stores. Is it all right to cancel these cards, or is canceling them going to hurt my credit. David's answer:
Terri, in the old days (like five years ago) I would have said, just close the accounts. Today I usually say keep them open because cclosing them may affect your credit score. For instance, if you have $10,000 in available balances on these cards and you close them your utilization rate could go up. It won't hurt as much, however, if the cards have super small credit limits. The big thing with old cards that you don't use is to monitor your credit reports regularly to make sure they are not being used by someone else! Question from Paula:
Hello David! I make $5,000 a month. I rent. I'd like to buy a house. How do I do that with less than perfect credit? How much do I need to put away each month? David's answer:
Paula, you are wise to want to buy a home. I still believe its the best long-term investment you can make, and homes are now much more affordable. Plus, rates are at a 50 year low. You can now borrow to buy a home and pay less than 4 percent (it's just amazing). I'm refinancing now at 3.5 percent on a jumbo mortgage. My suggestion is you go to your bank and see if you qualify now to buy a home. The big thing banks want is a down payment, and if your credit is less than perfect they can work with you over the next six months to help you improve your credit so you will qualify in 2011. GOOD LUCK!