Would I get into trouble for closing unused credit cards?

[jackvs]

Hi.

I have a total of five credit cards. Two were open in 2004, one in 2008, one in 2009, and one in 2010.

I'm using only the latest one and paying the balance in full, most months, and keeping the 2009 one for backup.

If I close the other three accounts, would I get into any trouble if I need a loan in the future?

I'm reading some articles that say it's better to close accounts that you do not use since it's not good to have too much "unused" credit calculating your ratio, while other articles say to never close accounts especially the oldest one but some other articles say that is a myth.

Anyone knowledgeable about this? Would appreciate your feedback.

Thanks in advance!

[dczech09]

Most underwriters look at credit utilization. If you have too much of your available credit used, they will see that as a bad thing. Generally speaking, if you have more than 25% of your available credit used, underwriters will see that as a negative. As an example, lets say that you have a credit card with a $4,000 limit and you have $2,000 owed on it, you have a utilization of 50% which is not good. So some critics say do not cancel your credit cards because you would lower your available credit, thus increasing your utilization rate if you owe anything.

However, on the other hand, it is not smart to have too many UNUSED credit cards. Having so much available credit that is never used can go against you too. Remember your credit score is a "debt score" and it requires debt to make it better.

So you have to make sure you are not borrowing too much, but you are not leaving so many cards "never touched." Its a balancing act.

I am an advocate of having one or two credit cards on hand. More than that is generally a waste in my opinion.

[PatientSaver]

I would keep your oldest cards, even if you don't use them. Longevity counts with credit card issuers, and an older card will demonstrate a longer track record of responsible credit management than a newer card, so you'd be shooting yourself in the foot by getting rid of your oldest card. I'm assuming, of course, you have your spending under control.

[Petunia 100]

Have you heard about Credit Karma? Credit Karma is a free site which calculates your credit scores. It also has a tool which allows you to try different scenarios and recalculate your scores. Scenarios such as...what if I closed my old credit cards?

It is hard to have perfect credit. I don't have perfect credit, mainly because my average age of open accounts is too low. I got divorced at age 40 and so closed all joint credit accounts. I had always kept a few open accounts in my name only, two department store cards. Both stores declared bankruptcy a few years back and so my accounts were closed. One of them I had opened in 1987. So my credit score took a hit over that. My ex "bought" our house from me and took a new mortgage in his name only. The mortgage on my new house is 4 years old.

Also to have a perfect score, you need to have a mortgage, an installment account (such as a car loan), and revolving credit (credit cards) to have perfect credit. I don't have a car loan so I lose a few points there as well.

Even so, my credit score is "excellent" and I have no trouble obtaining credit.

I suggest you find a good rewards card if you don't already have one. After you have that, use Credit Karma to see what happens to your score if you close one old account. So long as your score is above 740, go ahead and close one. If if would drop your score under 740, hold off. 740 is the magic number.

Free Credit Score & Credit Report Card. No Credit Card Needed

[MonkeyMama]

The thing is, the effect of closing old credit cards is usually pretty exaggerated. (Exaggerated of course, by lenders, who don't want you to close your credit accounts).

It just depends. Do you already have a an excellent credit score? Do you have an auto loan or a mortgage? IS your utilization low?

Since having a mortgage, I have found it hard not to have an excellent credit score. (All bills paid on time, credit cards paid in full monthly, low utilization, mortgage always paid on time, no auto loans).

Besides paying my bills on time and keeping utilization low, I do everything else pretty *wrong* - from whatever the *experts* say. I've personally had credit for about 20 years. Good credit stays on your report for 10 years. Though I have never heard good/closed credit referenced for FICO, it seems obvious to me it counts for most of our score. I only have 3 years max open credit of any kind (mortgage and credit cards), but have generally always had a 800+ credit score. True since having a mortgage, anyway.

For reference, my spouse *buys* all this and has some credit card that is almost 2 decades old. I don't see that it amounts to a hill of beans, since our FICO scores have always been pretty identical (having all joint credit, otherwise, for 12 years). At the moment, my score is about 5 points higher. (Lord knows why - no one really understands FICO).

My personal method has always been to close an old card when I open a new one. I am sure it is worse to close several very old cards at once. Just as an aside.

[maat55]

Unless you fear the fico god, why would you get into trouble?

You are your own master, close any of them you wish. I have good score without having cards I do not want.