Credit score and credit card experts, question please

[wdwmom2]

I have a credit card account that I would like to close. But I have read that closing accounts can actually hurt your credit score, but I never read why. I just checked my credit score through the three major credit score companies and I have two excellent scores and one very good. My question is why can closing an account make your score go down? I don't want to affect my score but would like to close the account.

Any insight on this????

 

[Alicnwondrln]

im sure but you can find the answer here
www.creditboards.com

 

[RAD]

One of the things that they look at is your total credit available vs. the amount of balances you have, the higher the ratio the lower your score.

Example, you have three cards, each with a $10,000 limit for $30,000 total. Two of the cards have a $5,000 balance for a total of $10,000 and the third card has zero balance, so they see $10,000 in balances and $30,000 limit, you're using 1/3 of your available credit. You cancel the card with zero balance then now see $10,000 balance and $20,000 balance, they now see you using 1/2 of your available credit. It also doesn't matter if you pay off a card every month, the card companies report your closing balance, so if you run up $2,000 in charges in a month and pay it off as soon as you get the bill the credit bureau still thinks you have a $2,000 balance on the card subtracting it from your available credit, again messing up your ratios. Hope that helps.

 

[wdwmom2]

So what should I do? Leave the account open and just not use it???? I hate to have an open line of credit with no use on it and not planning to. I used to use it but don't need it. Is it worth leaving it open and just not using it so that my credit score is not affected????

ETA: I have two other cards, 1 with a small balance and one with a zero balance. Oh, and a couple department store ones, zero balace, never use them, have had them forever. I guess the free gift to sign up was just too tempting at the time !

 

[nowellsl]

They also look at your credit history - how long you've had credit. If this account is one of your oldest, don't close it. Why not just put it away and don't use it.

 

[Toby'sFriend]

if you have no plans to apply for a mortgage or a car loan or similar within the next year and want to close the account - generally I would just close it. If you are choosing which account to close, generally you want to consider how long the account has been open as well as which account has the better terms.

My own thoughts on this subject is that it is far better to live your life by common sense than by a 3 digit number assigned to you by a bunch of people at FICO. If you have a credit card that you are not interested in using any longer, then common sense says to close it.

Why not keep it open? Because an open credit line has to be monitored in case it is ever stolen and used fradulently - and besides having too much open credit can also hurt your score.

 

[puffkin]

I too have heard that if it is an old account, it is better to keep it open. I have an old card from college that I never use, but I am hesitant to close it because it is so old. I have a very small limit on it though, so it doesn't bother me too much. Maybe you could call and have your limit reduced on the card? That way, you can leave it open but not have to worry about it having a huge impact of your total "potential debt" rating.

 

[caitycaity]

My own thoughts on this subject is that it is far better to live your life by common sense than by a 3 digit number assigned to you by a bunch of people at FICO. If you have a credit card that you are not interested in using any longer, then common sense says to close it.

Why not keep it open? Because an open credit line has to be monitored in case it is ever stolen and used fradulently - and besides having too much open credit can also hurt your score.

i completely agree with this.

btw, i have closed 2-3 cards and have a near perfect credit score (i always qualify for the best apr on car loans, etc.). i wouldn't let it worry you too much.

JMHO.

 

[Linnie The Pooh]

DH's CFO told us that the more credit cards you have the more it hurts your score. I had about 5 that I never used. DH has one and his credit rating was higher than mine, although they were both in the excellent range. He told me it was from applying for too many credit cards.

When I go to the stores and they offer 10% off if you apply for a credit card, I always did that thinking it was a good idea. Then I ended up with all these accounts. So I closed them for security purposes. People can still access your info. even if you never use them and why take a chance on idenity theft or something?

I'd close them if it was me. I think you can maintain a good credit rating in other ways. I have to add, my grandma for years kept bragging to people that she had no credit and didn't have a credit rating b/c she didn't have a credit card and only pays cash for everything. I finally told her she actually did have a credit rating. She was sure she didnt-like it was a bad thing to have!!

 

[icebrat001]

This is what our loan broker told us. She said, if you want to close a credit account, close your newest card and it won't affect your score much at all. It's bad when you close your old accounts.

 

[disneynutt1225]

I paid off and closed *all* of my old accounts in October. Now I have 3 cards (2 I just got in the past 2 months and one I've had a little over a year). Since October, my FICO score has gone up 50 pts. I plan on closing my oldest card next and keeping only my two newest cards. I just can't see paying a monthly fee to be able to pay my bill online. That irritates me, LOL.

If you have excellent credit and are not applying for a mortgage any time soon, close the card. In the event that your rating does go down, odds are it will go back up in a couple of months again anyway.

 

[LuvTigger]

I think it all depends on your personal situation. I've heard Suze Orman, and several other financial analysts, explain it the way RAD did. If you have a lot of credit card debt, keeping it open will help to increase your FICO score.

But, if you have several credit cards and hardly any balances and you have too much credit, it seems like it would make sense to close it.

I would also recommend www.creditboards.com. I learned about it on the DIS Budget Board, and there is a LOT of information there! (Almost too much -- it takes a while to learn all the lingo, but they're very helpful there.)

 

[Disney-Kim]

Do not close any card that you have had for more than 2 yrs. The age of your credit history goes a long way in raising your credit scores AND looks more appealing to new creditors/mortgages/etc....to have LONG history. not a short one.
so if its fairly new, close it. if not, just leave it alone.

why is everyone so afraid to leave old accounts open??? just cut up the card and be done with it. If you are afraid of fraud...a qtrly credit report can help you keep tabs on your credit report. closing all your old credit accounts to improve your credit (ie...too much available or too many credit cards) is an old myth.

I also suggest reading creditboards.com. there is a lot of info and good advice by those who live it, not just those who think they know.

 

[wdwmom2]

Thanks for all the info. I knew I would get answers here!! I have had this card for awhile. I think that I will keep it open.