Paid off CC's..now what..close them?

[DISworldTravelers]

hi everyone, just found these boards while planning a trip to DW. Now that I've paid off all of our cc's, I plan on keeping ONE card to use - the capital one which has the 4.99% lifetime interest. however, i am wondering, what do i do with the other cards? Should I close them or does that actually HURT your rating and score. These boards are great; I am really learning alot, especially on this budget board. thanks everyone!

 

[DLANGE3386]

I am in the same position. I have closed 2 but left others open as I heard your credit looks better that way. Should be interesting to see what others say.Feels good doesn't it?

 

[DISworldTravelers]

Yes it does feel great. It is our Christmas present to ourselves. Happy New Year to us! The key is KEEPING it that way!

 

[skiingwife]

After we paid off our credit cards, we closed them all. We only use a debit card now. If you can build up an emergency fund ($1000 at first, building up to 3-6 months of expenses) then you will have no reason to use a credit card. Since you've worked so hard to pay off your cards, I'd hate to see you build up a balance again. It has not been a problem for us in the past 3 years having only a debit card.

 

[ntburns22]

We were told not to close them because it could lower your credit score.

 

[Alicnwondrln]

We were told not to close them because it could lower your credit score.

exactly
if you close them all it will hurt your credit score

 

[DianeV]

But on the other hand having alot of available credit/open accounts also can hurt you when applying for any new credit (like a car, house etc) They feel that you could run those back up at any time

 

[kittymasi]

Lock em in a drawer or something, but don't close them. I mean, yes, if you have ten cards, then close a few, but only close the ones that you have had for the least amount of time. Keep your oldest cards, and maybe once in a while, buy a small item with them just to keep them active. Just be sure to pay off every month. Closing cards DOES lower your score, because creditors see that as a sign you can't handle credit. Whether this is true or not, it will harm your credit worthiness. Only close cards if you have an excessive number of them.

 

[DISworldTravelers]

I no longer have any of the cards that i have accounts for. I had transferred balances to 0% cards to not pay interest but when the accounts were opened and the card came in, i cut it up. I think the Capital One card is the oldest one that I still have so that would be a good one to keep it looks like. I did have quite a few at one time so I will just close a few of the newer ones and keep an eye on the score. I subscribe to CREDITINFORM; does anyone else have them? You get quarterly reports of payments, your score, etc. I was going to cancel that but maybe I will keep it a little longer to keep an eye on the score. It's only $4.99 a month.

 

[meuseman]

one of the biggest factors in your credit score (especially if you have never missed a payment) is credit history - how long you have had credit accounts. By closing your credit cards after you pay them off, you could dramatically decrease your credit history, since closed cards don't count toward your history. Also, a big part of your credit score is utilization. What percent of your available credit are you using. Lower utilization = higher credit score. If you close credit cards, you are lowering your available credit, which is in turn raising your utilization.

Like others have said, keep the credit cards in a safe, moderately inaccessible place, so that you are not tempted to use them, but they still give you benefit.

Also, don't forget that debit cards do not have all of the protections that credit cards have. Most credit cards have built in travel insurance, must better disputing procedures and if misused, your credit card does not deplete your hard earned money.

 

[peachgirl]

It depends on how many cards you have and what your credit limits are. Since you don't currently have a balance on any of them, your percentage of available credit is 100% and it can't get any better than that.



The problem with closing cc accounts lowering your credit score is when you carry balances. For example, if you have 4 CC's with a credit line of $2000 each ($8000 total)with one card at it's limit of $2000, you're still only using 25% of your available credit. If you closed the 3 with no balance, you'd be using 100% of your available credit and that would not be a good thing.

You also have to consider whether or not keeping all those cards open will hurt your credit score. Whether you carry a balance or not, the credit limits set on each card are considered almost the same as if you actually were carrying that much on a balance. CC balances are unsecured credit and too much unsecured credit can hurt your score as well.

It's a matter of striking the right balance. It's not always a good thing to close accounts, but it's not always a bad thing either. I'd keep one to use, then keep one just for credit purposes.

At least that's how it was explained to me....

 

[Buttercup26]

In most cases it will lower your credit score to close cards. It is almost always more detrimental to have cards that show up as account closed (it usually doesn't say WHO closed the account) then to have several open cards with large balances available. After awhile the closed accounts will drop off of your credit report but then you will have little or no "available" credit. To have the best credit score you need a reasonable amount of "available credit".

 

[vhoffman]

I've also read that closing your cc's can lower your credit score. suzy Orman says so, too!

Also, it might be harder to get credit in the future if you don't maintain a credit history. Face it, we all need credit to live in this economy, just use it wisely. Also, PLEASE don't cancel all your cc's. They might be your only emergency source of cash. What if you're on a trip and need car repairs? Or its 3 am on a Saturday and the hot water heater springs a leak? The repair people could care less that you have an emergency fund in the bank. They want payment NOW. Use the cc then pay it out of your emergency fund. I had just that situation today. The wash machine sprung a leak and I had dirty clothes piling up. I called a repair man who came immediately and fixed it for $165. Well, I used a cc. When the bill comes in I will write a check off our emergency fund. Otherwise, what could I do? Run to the bank and take out what I hope would be enough? Write a check between pay dates and hope it didn't bounce? Now, to get back to that laundry

 

[MikeL1515]

I have heard that you always keep your oldest credit card. It shows credit history.

 

[Luv2trav]

We plan on closing all of our credit cards as soon as they are paid off. I know it hurts your credit score but to be honest I don't really care. I don't plan on making any big purchases for at least another 6-10 years.. WE just bought a new home this past May and we really don't need to have high credit scores. We have VERY good credit right now and what's the use unless we plan on getting MORE credit...

I think it's ridiculous they can do that.

 

[Noah122898]

I work for a major financial institution and it does NOT lower your credit score if you close credit cards. The credit bureau reports that it was closed by the subscriber and that is a good thing. I don't recommend closing ALL your credit cards, I would definately keep the oldest one or two. When you have lots of open cards with available balances it has the potential to get you into heavy debt and that actually lowers your score.

 

[Toby'sFriend]

It is true that closing all your credit cards will lower your credit score -- however have too much available credit is also frowned upon. My thoughts: live your life by common sense and not some 3 digit number a bunch of people who work for FICO want to assign you.

What is a credit score used for? It is used to borrow money at good interest rates.

I guarantee you, if you have a history of having paid off all your credit cards, have developed a savings account of 3 to 6 months of your salary, have retirement accounts, investments, own the Title to your car, have an excellent history of paying your mortgage or rent, and have a good job and salary history....

Then you will have absolutely no trouble at all of borrowing money at good rates. If the time came that you wanted a new mortgage - bankers would be knocking each other down trying to get to your door first, I promise.

That being said, if you are going to close all but about one or two cards - the ones you keep open should be the ones with the best term and also the ones that you have had open for the longest time.

 

[peachgirl]

We have VERY good credit right now and what's the use unless we plan on getting MORE credit...

I think it's ridiculous they can do that.

It's probably important to consider that the "damage" to your credit by closing credit card accounts is minimal, if any. The only time it would really matter is if your credit is borderline or if you have very little credit history so that every point was crucial.

 

[kaytieeldr]

Don't close the accounts. How much available credit you have does matter on your credit score.
Instead, put all but one emergency card in a zipper-top bag; seal; put bag in another bag; seal; place bag in reasonable-sized freezer-proof container of water; freeze; forget.

 

[metivier]

If you are planning a major purchase shortly, do not close your credit cards. If you are not planning a major purchase, close them.

Quoting Michelle Singletary:
http://www.michellesingletary.com/credit.htm
Question:
Excuse me? Closing a credit card account will DROP a credit score? I thought that creditors and raters looked at your total credit limits and if they were too high (i.e., you could get into a really big hole), they dinged you for it. I've been closing seldom-used accounts (like department store charge cards) to simplify and reduce the number of open accounts we have to keep track of. Have I ruined our credit rating? We've had, and still have, major credit cards for 35 years, with a near-perfect payment record.

Answer:
You're worrying too much. If you close a long held credit account it can drop your score. This becomes an issue only if you are about to get a major loan (car, home loan). But if you're not in the market for credit and you have other old credit cards by all means close accounts you are not using. Your score might take a minor ding but in a short time it won't matter as long as you continue to pay your bills on time and don't max out the cards you do use.