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It is currently Wed Oct 22, 2014 5:18 am




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 Post subject: Credit cards: Close out or Keep open
PostPosted: Tue Apr 29, 2014 10:23 am 

Joined: Thu Jan 23, 2014 6:34 am
Posts: 2
I am looking at getting a credit card that has cash back rewards or air mileage rewards. But I have 1 credit card that I use now and 4 cards that I do not use anymore, one with a annual fee. ? should I close them out / cancel them. I heard that cancelling them hurts your credit.

Thanks


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Tue Apr 29, 2014 10:42 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1776
Location: Ottawa, Canada
You should close and cancel any credit cards you aren't using, particularly if they have an annual fee. The hit to your credit score will be minimal and temporary.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Tue Apr 29, 2014 10:50 am 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5395
kombat wrote:
You should close and cancel any credit cards you aren't using, particularly if they have an annual fee. The hit to your credit score will be minimal and temporary.


That's actually not true. If you close your oldest card the ht to your score could be fairly dramatic and long term. I've had my oldest card for over 20 years. When I "simulate" the impact of closing that card the hit is fairly big. I otherwise have 800+ scores based on real credit reports. Closing that old card could take it down to the 730s. That low a score could have a very real cost in terms of higher insurance costs, higher interest rates if I had to borrow, and so forth.

Now, for most people, especially if "old" is measured in 3-4 years, you are right. But the OP did not mention any details.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Tue Apr 29, 2014 10:46 pm 

Joined: Thu Apr 03, 2014 12:06 pm
Posts: 154
DoingHomework wrote:
've had my oldest card for over 20 years. When I "simulate" the impact of closing that card the hit is fairly big. I otherwise have 800+ scores based on real credit reports. Closing that old card could take it down to the 730s.


Wow DH! I am surprised that one card could have such an impact!

I have left all of my cards open. Discover recently closed one of my accounts for inactivity. But, I just let it go. It wasn't even close to the oldest card. But, I'm now thinking that it caused my score to drop more than the fact I picked up a mortgage. Interesting.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Wed Apr 30, 2014 4:15 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1776
Location: Ottawa, Canada
DH: You're right, I guess if you have one card that is dramatically older than the others, closing it could have a noticeable impact on your credit score. The OP didn't give us enough information. I had assumed all the cards in question were of relatively the same age.

Also, I'm not sure how long it takes for your score to recover after closing an older card. Does it take as long as one of your remaining cards to reach the same age as the one you closed? I wouldn't think it would be quite so bad.

Finally, I'm not sure a credit score drop would have much of an impact in your life anyway, unless you were planning on borrowing a bunch of money in the near future (buying a house, financing a new vehicle, etc.). If you don't plan to borrow money in the next few years, I wouldn't fret about a drop in my credit score. I'm also not convinced it would have a significant impact on things like insurance rates either, but maybe things work differently in the US.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Wed Apr 30, 2014 3:30 pm 
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Joined: Fri Mar 14, 2014 4:10 am
Posts: 65
1) Close out the one with an annual fee; there's no need for annual fees today unless you are spending enough (and the card's rewards are awesome enough) to earn you enough to cover the fees and eclipse any rewards you'd earn from a non-fee card.

2) I'm going to go out on a limb and assume that at least a couple of the 4 cards you no longer use are store cards. If they don't bring your average length of history down too much, close those. Store cards are terrible IMO. They limit where you can spend them, they limit the limit (which can affect your utilization %), and the rewards (if any) are usually only redeemable at that store...cornering you into shopping there even if there are better deals.

3) Stop opening credit card accounts. Stick with a few basic, multi-use cards with higher limits.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Fri May 02, 2014 7:38 am 
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kombat wrote:
DH: You're right, I guess if you have one card that is dramatically older than the others, closing it could have a noticeable impact on your credit score. The OP didn't give us enough information. I had assumed all the cards in question were of relatively the same age.

Also, I'm not sure how long it takes for your score to recover after closing an older card. Does it take as long as one of your remaining cards to reach the same age as the one you closed? I wouldn't think it would be quite so bad.

Finally, I'm not sure a credit score drop would have much of an impact in your life anyway, unless you were planning on borrowing a bunch of money in the near future (buying a house, financing a new vehicle, etc.). If you don't plan to borrow money in the next few years, I wouldn't fret about a drop in my credit score. I'm also not convinced it would have a significant impact on things like insurance rates either, but maybe things work differently in the US.


They work differently in the US. Credit score most definitely has an impact on insurance rates.

As for assuming all cards are relatively new - in that case, I agree with you that closing one with an annual fee would be wise.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Mon May 05, 2014 8:36 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1356
DoingHomework wrote:
They work differently in the US. Credit score most definitely has an impact on insurance rates.


I think it depends on the thresholds, though, rather than absolute scores, right? In other words, it's more like a pass/fail or A, B, C, D, F grading system rather than a number grade system; i.e. you get no benefit if your score is 800 versus 750 if the threshold for "good credit risk" is 740. Anything above 740 would be deemed good credit risk and you'd get the best rates regardless of whether your score is 741 or 820. (I'm just using arbitrary numbers here, I think thresholds vary.)


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Thu May 08, 2014 9:02 am 
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Joined: Wed Sep 23, 2009 9:01 am
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brad wrote:
I think it depends on the thresholds, though, rather than absolute scores, right? In other words, it's more like a pass/fail or A, B, C, D, F grading system rather than a number grade system; i.e. you get no benefit if your score is 800 versus 750 if the threshold for "good credit risk" is 740. Anything above 740 would be deemed good credit risk and you'd get the best rates regardless of whether your score is 741 or 820. (I'm just using arbitrary numbers here, I think thresholds vary.)


I think thaat is true but it is very hard to get solid information about that.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Thu Jun 05, 2014 3:46 am 

Joined: Wed May 28, 2014 11:47 pm
Posts: 6
Seriously I had no idea that closing a card has such a big impact! I mean I am using new one and never considered the old one, infact I was thinking of to close it but now let me check how much impact does it have on my score now.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Mon Jun 09, 2014 5:01 am 

Joined: Mon Jun 09, 2014 4:47 am
Posts: 5
it came as a surprise to me that one card can have so much impact!


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Wed Jun 25, 2014 1:28 pm 

Joined: Tue Oct 29, 2013 2:14 pm
Posts: 178
DoingHomework wrote:
When I "simulate" the impact of closing that card the hit is fairly big. I otherwise have 800+ scores based on real credit reports. Closing that old card could take it down to the 730s. That low a score could have a very real cost in terms of higher insurance costs, higher interest rates if I had to borrow, and so forth.


Resurrecting an older topic here...

DH - how/where did you simulate changes to your credit score? I'd love to play around with different scenarios to see what could help or hurt me.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Sat Jun 28, 2014 3:11 pm 

Joined: Sat Jun 28, 2014 7:24 am
Posts: 20
I say keep them open because it can harm your credit score if you close them. Unless they are costing you a yearly fee, just leave them open.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Wed Jul 09, 2014 6:08 pm 

Joined: Wed Jun 25, 2014 11:10 pm
Posts: 2
I feel you must cancel your unused credit cards. Having many credit cards may hamper your credit score, which may eventually create further problems. Having multiple credit cards can cause you identification theft. So it is better to cancel unused credit cards.


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 Post subject: Re: Credit cards: Close out or Keep open
PostPosted: Tue Jul 29, 2014 9:25 am 

Joined: Mon Apr 07, 2014 4:46 am
Posts: 18
kombat wrote:
You should close and cancel any credit cards you aren't using, particularly if they have an annual fee. The hit to your credit score will be minimal and temporary.

I agree with you. I close and cancel any credit cards i 'm not using always.


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