Credit Score: Close Unused CC's?

[fe2o3ez]

So I got in this debate with my Mother-in-Law last week...

It started when I got the renewal notice for my AMEX card. I rarely use the card, perhaps once or twice a year, (if we book a hotel or rental car, I will reserve it on the card and just let the charge go through) but I pay it off immediately before I need to worry about interest, etc. I've carried their card off and on for about a decade and always managed to get around the annual fees. When I got the renewal notice, though, I began to wonder why I really needed it. Don't use it much, plus I have Visa Debit cards and a Kroger Mastercard that I use monthly to purchase groceries and earn points (then pay off). Besides, the AMEX has a $19k credit line and I dont see the sense of keeping that on my record. The Kroger card has a $7k line and I rarely take it above $1000 on a monthly basis before the lump sum payoff.

I opened the renewal notice and made a side comment that I would probably just close the card instead. My mother-in-law was visiting and she jumped in with the statement that we should NOT close the CC, but rather leave them out there until the card company closes them. She said her banker said closing unused CCs actually HURTS your credit score!

Not one to have my own logic over-ridden, we got into quite the discussion about it. In some cases, I can see why her banker would say it: if we carried a regular balance on one card - say for 20-50% of its line, and have another card that has a large line with no balance, then the large card is working to reduce the debt ratio and help the credit score, or at least our credit rating. However, in my case, where I dont typically carry a balance at all (knock on wood) and always pay my bills on time, I dont see the sense of having the extra credit exposure on my record.

Am I missing something? I'd appreciate it if someone who is an expert on this kind of thing, could let me know their thoughts. Thanks

[Caoineag]

Its no big deal either way. Yes it technically hurts your credit score to close it but if you have enough other long term credit, its really not that big a deal. By and by, no one is going to claim to be an expert on this forum, just informed,

[disneysteve]

I'm not clear. Does this card have an annual fee or not? If there is a fee and you don't need the card, close it. If there isn't a fee, keep it.

[gertymac]

Closing a card can also impact your credit score in two other ways:
1. Length of credit history
2. Amount of credit available

By closing the $19K card you are going to drastically reduce your available credit, which may make you look less trustworthy to other creditors. Also, if this is your oldest card and you close it, it will shorten your credit history.

I'm not sure how much either of these, or the combination, will ding your score.

[MonkeyMama]

Gertymac points out the issues.

In general, if you have a good score, and generally do not charge more than 1/3 of your available credit, I would just close the card. (Even if you pay in full every month, credit company reports a balance monthly since they report it monthly and you probably always have some charges on there. You probably charge more before you pay off last month's bill, for example).

I personally would never a keep an unused card open for FICO, and have always had a 800-ish FICO. Thing is, length of history is such a small piece of your credit score, and GOOD CREDIT stays on your report for a decade anyway. This is more of a concern if you are raising a bad credit score. If you are maintaining a good credit score, I wouldn't worry about it.

[nataliya]

Never close the credit card accounts - you cut yourself a line of 'credit available" and your credit score will drop.