Expert advice on credit cards and credit scores

Gerri Detweiler

We all know that paying bills late or not at all, bankruptcy, or default can torpedo our credit score. But there are other less obvious things that can also drive down that score. These include credit card balances that are too high (called utilization), too many credit checks (inquiries into your credit file when you apply for credit) and the age of your credit history.

Gerri Detweiler, director of consumer education for, suggests looking at the credit limits on your credit cards (individually and in the aggregate). If you are using more than 10 to 25 percent on any card or cards, try to get the balances paid down.

For example, if you have a credit card with a $10,000 line of credit, your balance should not go above $1,000 to $2,500.

The age of your credit history isn't something you can change quickly, so the key is to start building your credit file as soon as possible. Teenagers who are responsible with money can be added to their parent’s account. They become an “authorized user” and even though they are not the primary cardholder that information is reported to the credit bureaus. This builds their credit history.

During a TODAY Money chat this week, Detweiler dealt with a range of credit-related issues, such as is it OK to close an old or unused credit card account?

Gerri Detweiler: I don't think you should ever be held hostage to a credit card you don't like because of the fear that closing it will hurt your credit. Closing an account takes the available credit out of your utilization ratio, so that can hurt… but the closed account still remains on your credit history and can help in terms of the age of the credit history and the positive payment history.

TODAY: Do credit card companies ever close an account if you don't use it?

Gerri Detweiler: Absolutely. If you don't use your card it can be closed for inactivity. And that creates the issues we just discussed. If you haven't used your card in a year or more you are at risk of having it closed. To keep it active you can just use it once or twice a month and pay it in full. That's usually all it takes.

TODAY: Every situation is different, but how many credit cards should we have?

Gerri Detweiler: There's no magic number, but it's very hard to get a credit good score without at least one major credit card. I would say two to three is a safe bet, but don't worry if you have more, as long as you are paying them on time and keep your balances low.

TODAY: What about renting a car or reserving a hotel room? Can I use/should I use my debit card for that?

Gerri Detweiler: Some hotels and car rental agencies will let you do that. One major car rental agency will check your credit (and create a hard inquiry!) if you use a debit card. (Note: Hard inquiries can lower your score.)

The big problem with the debit card is the “hold” which ties up a chunk of your cash until the charge goes through and the hold drops off. With the hold they "freeze" the estimated amount of the rental or the hotel stay plus a little extra. That money is unavailable to you until the charge actually goes through and the hold, or freeze, is lifted.

TODAY: A lot of gas stations put a hold on your debit card – which is really money in your checking account – that has no relationship to how much gasoline you just purchased.

Gerri Detweiler: Yes, at a gas station a freeze or hold is usually placed for about $75. If you want to use your debit card at a gas station, you can go inside and ask them to run the amount that you want to put on the card instead.

Read the full chat:

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitteror visit The ConsumerMan website.

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