Closing Credit Cards?

[Chaos151p]

I'm new here & have been enjoying the endless amounts of topics/posts about savings and credit. I thought I might be able to get some help on my current situation. About 8 months ago my credit score finally reached around 740 after paying off most of the balances on my credit cards, then after putting those balances back on my score dipped back to around 620.

I received a loan to consolidate all of the bills, and I want to cancel all but one or two of the cards. I'm hoping that my credit score would increase to 700+ over the next 10-12 months. I'm not sure how paying off & then canceling most of the cards would affect this or not, if I keep the two longest lasting cards would my score be negatively affected but eventually get better over the next year? Any thoughts & advice would be greatly appreciated. Thanks alot

[jen-taylor]

hey there, don't cancel those cards. consolidate all the balances onto one card, and *stop* using those with $0 balances. either shred them or keep them in a safe place. cancelling credit cards may actually lower your credit score (either through decreasing available credit or shortening credit history).

[Scanner]

Actually, I think canceling most of your credit cards is a good idea.

Having lots of unsecured lines of credit doesn't make your credit look good, even if you are good on making payments and such.. Any future creditor would see all that "potential" for you to go awry and make them less likely to give you that mortgage or business loan.

It's consumer debt (potentially) and that never looks that good. Paying on student loans, mortgages, and business loans are what propel your creditworthiness.

Decide how much credit you need, my credit card has about $9000,00 - I don't even need that - I occasionally need to make a big purchase on it (let's say I buy a refridgerator or something) but really, how much credit do you need?

Then just have one card for all your purchases.

I have a business so I need to have two cards, sometimes, if you are in sales, you may want a "gasoline card" but really there isn't too much reason to have other lines of credit.

[tinapbeana]

if you have multiple cards and you close all but the 2 oldest, you will actually be increasing the average age of the cards.

i.e.

card 1 = 1 yr old
card 2 = 2 yr old
card 3 = 3 yr old
card 4 = 4 yr old
card 5 = 5 yr old

your average age is 1+2+3+4+5 / 5 = 3 yrs

if all you have is card 4 and card 5, your average age is 4+5 / 2 = 4.5 yrs

[Chaos151p]

Thanks for the info! I think I'm going to cancel all but the two oldest ones, maybe even keep a third - but three definitely have to go. Hopefully even after canceling them & a slight drop in score... having two loans with the credit union will help increase my creditworthiness like Scanner said. I'm not looking for a quick fix, but more like a gradual raise in my credit score, thanks again.

[click4credit]

I would agree, cancel all but the oldest onces. The total amount of your credit limits you have reduces your borrowing capacity for loans etc as banks see this as a liability. If your not using many of these cards then your better off without them.

[poundwise]

Yep.

It should also be pointed out that the general view that closing card accounts is bad is:

(a) often wrong because of the fact that closing some cards will raise your average age of accounts

(b) often wrong because too many open accounts can be viewed as a negative (especially true of mortgage lenders)

(c) often right; however, the lowering of the score that happens is a temporary, short-term effect

My view on it is this... keep the cards you want (giving some preferential consideration to the oldest one or two) and ditch the rest. Don't try too hard to manipulate the score. What ends up happening is the score manipulates you.

[jIM_Ohio]

Why do you need a high credit score?

Being out of debt and staying out of debt is more important than a high credit score.

[sweeps]

Originally Posted by jIM_Ohio

Why do you need a high credit score?

Being out of debt and staying out of debt is more important than a high credit score.

Unfortunately credit scores are being used for way more than just getting loans these days. They're used as a proxy for all kinds of purposes -- getting a job, getting insurance, etc. Also I would say that not all debts are created equal. Debt that increases your future net worth is a good thing (mortgage, student loan, etc.). Debt that is used for consumption, on the other hand, is not so good.

[jIM_Ohio]

Originally Posted by sweeps

Unfortunately credit scores are being used for way more than just getting loans these days. They're used as a proxy for all kinds of purposes -- getting a job, getting insurance, etc. Also I would say that not all debts are created equal. Debt that increases your future net worth is a good thing (mortgage, student loan, etc.). Debt that is used for consumption, on the other hand, is not so good.

But 600 is not a bad score. Yes it could be better, but let's not lose sight that credit is NOT a game. Highest score does not "win" anything.

I agree with what you posted... I don't think it's right (FWIW)... I saw little from OP that he needed credit.

[sweeps]

Originally Posted by jIM_Ohio

But 600 is not a bad score. Yes it could be better, but let's not lose sight that credit is NOT a game. Highest score does not "win" anything.

I agree with what you posted... I don't think it's right (FWIW)... I saw little from OP that he needed credit.

Agreed.

[krayziebone33]

Originally Posted by tinapbeana

if you have multiple cards and you close all but the 2 oldest, you will actually be increasing the average age of the cards.

i.e.

card 1 = 1 yr old
card 2 = 2 yr old
card 3 = 3 yr old
card 4 = 4 yr old
card 5 = 5 yr old

your average age is 1+2+3+4+5 / 5 = 3 yrs

if all you have is card 4 and card 5, your average age is 4+5 / 2 = 4.5 yrs

Can you explain to me why the average age of credit cards is important in business and/or credit terms?

[krayziebone33]

Originally Posted by poundwise

Yep.

It should also be pointed out that the general view that closing card accounts is bad is:

(a) often wrong because of the fact that closing some cards will raise your average age of accounts

(b) often wrong because too many open accounts can be viewed as a negative (especially true of mortgage lenders)

(c) often right; however, the lowering of the score that happens is a temporary, short-term effect

My view on it is this... keep the cards you want (giving some preferential consideration to the oldest one or two) and ditch the rest. Don't try too hard to manipulate the score. What ends up happening is the score manipulates you.

Poundwise, can you explain to me what point (a) means. What is the "average age of accounts" and how does it apply in business or credit terms? Someone else posted something similar to what you posted but I have never heard anything about the age of accounts mentioned; not in literature I've read or any class I've taken on campus thus far.

[jIM_Ohio]

Part of credit score is the "length of time" account has been open. Longer/older accounts are more favorable.

[Ima saver]

I honestly think you should not cancel a card. I have several, all with zero balances. I keep the cards, but I just don't use them. My credit score is 817.

[jIM_Ohio]

Originally Posted by Ima saver

I honestly think you should not cancel a card. I have several, all with zero balances. I keep the cards, but I just don't use them. My credit score is 817.

I have accounts I have not used in years (Circuit City, Best Buy...) and my score is between 750 and 780 depending on the agency.

I have dings on the score (according to latest mortgage refinance), because I have too many open accounts.

OH WELL. I am not living life to have the highest credit score. My credit is above average, that is good enough for me.

[Ima saver]

Once in a while a card that I have not used in years closes the card for me. Otherwise, I don't think having them has hurt my credit. I think having a higher score has helped me on my insurance premiums since I tend to have cars that have normal than higher premiums.
Right now I am paying about $800 a year on the vette and I don't think that is too bad.

[krayziebone33]

Originally Posted by jIM_Ohio

Part of credit score is the "length of time" account has been open. Longer/older accounts are more favorable.

Thank you.

[th_tan]

Don't close off credit cards, long age credit cards help your rating big time. If you have cards less then a year old that you want to get rid of, they won't hurt as much though.

[LuckyRobin]

If you close out the credit cards be sure to include that you want the card issuers to report that the account was closed at user's request. That way anyone viewing your report will know that you closed them, not the bank owning the card.