To close or not...old credit accounts

[emma]

Hi,

Recently I pulled my 3-in-1 credit report w/ credit score just to see how things are looking up. Everything seems fine and i'm making payments on-time.
I noticed in the report I have some clothing company & department store credit cards that I've had since the beginning of my credit history (7 years -- i know, it might not seem long compare to a lot of other people's, but this is a long time for me ). They represent nearly 1/3 of all my current credit accounts. I never used these accounts, I probably cut up those cards years ago, I have no correspondence with those companies, and the companies might not even have my current information either. I also have one credit card account which I just opened up last month, but I don't plan to use it anymore. (yes, I opened to get discounts )
I read in many articles that closing old accounts can hurt credit score. Some suggested lowering credit limits on them. But I feel that leaving 3 or 4 accounts open with years of inactivity is like leaving that old backyard door unlocked -- a little hairy.
Since I'm not planning to apply for mortgage or auto loan at least in the next 2 years (perhaps later on), I'm thinking if it's better for me in the long run to close these inactive accounts now, not all at once of course. Or if I should start with that one most recently opened account, given that I won't use it again.
I'm wondering if anyone has experienced similar scenario, how did you go about the situation, and if your action had impact on the credit score. Sorry I'm asking so many questions, but any input would be helpful. Thanks!

[terry1156]

Re: To close or not...old credit accounts

Sounds like you have the right plan. If you're worried about how it will effect your credit score (or want to see), you can close one card, wait a month and then get one of your free credit reports for the federal trade commission site to see how it changed.

[PennyPincher]

Re: To close or not...old credit accounts

I would close the older store cards at this time, and keep the recently opened one. Companies that look at your credit report look at various things, and the average time you hold a credit card is one of them. It doesn't bode well for people to constantly open + close cards. Now, I've also opened cards for discounts ~ and if they are repeated discounts, I maintain them.

Companies also look at your potential debt, so by eliminating the older department store cards, you will lower your potential debt (of what you COULD run up....)

I think you've shown a good history with the older cards, and you can let go of them ~ since they are long gone in the physical sense anyhow!

I'm certainly not an expert, but I have gone through alot of credit stuff in the last 3 years buying 2 different houses...

[gakline]

Re: To close or not...old credit accounts

I'm going to disagree with everyone so far. I think you should close the newest one. (You can always reopen it again and they will usually give you the discount.)

1. A large part of your credit score is based on how long your accounts have been open. The longer the card has been open the more history you have.

2. Since you don't carry a balance on the card, it makes your debt ratio look smaller. You may have $15,000 limit with all the cards combined. If you carry $5000 worth of debt, you ratio is 1/3. But if you close the cards and your total credit limit drops to $10,000, with $5,000 still. Your debt is now 1/2. The smaller the debt ratio, the better you will look if you're buying something big, such as a house. (After you get the mortgage, then close accounts). Too much debt can hurt you, like Pennypincher was saying, so be reasonable.

3. Not that checking your credit score isn't good, but too many times can actually hurt you. A potential lender will see this as a sign you are going to open more credit accounts. I think you can get purchase a set time in which you can monitor your credit. If you purchased it online, I think you can use their calculator to estimate your new score if you close a card, pay off a card, pay on time, etc.

A side note. I know someone that had their identity stolen. She had opened up a department store card years ago at Target, and had never closed the account. The thief then tried to open a card there and was denied. This happened at 1-2 more places, and all because she had the cards still open.

Do some more research about it before you decide which one to close. A couple of good websites are: http://www.bankrate.com/brm/credit_scoring_home.asp and kiplinger.com among others.

[amomof4]

Re: To close or not...old credit accounts

I would agree with gakline. There is an article posted on this cite that says to close the more recent accounts & keep the older accounts. Check it out under the article section.

[Armywife]

Re: To close or not...old credit accounts

[QUOTE=PennyPincher]I would close the older store cards at this time, and keep the recently opened one. Companies that look at your credit report look at various things, and the average time you hold a credit card is one of them. It doesn't bode well for people to constantly open + close cards. Companies also look at your potential debt, so by eliminating the older department store cards, you will lower your potential debt (of what you COULD run up....)
QUOTE]
This is soo true... Credit card companies don't like open credit lines because if by chance a good consumer gets hit with identity theft- that would be ALOT of cards to play with ... or at least that's what they told me when I went through counseling after my BK couple of years back.

Also be sure to double and triple check that the info on your report is 100% accurate. As spelling and grammar counts in school- one incorrect word can make you look like a liability or worse ( CHARGEOFF= baaaaad)

[PennyPincher]

Re: To close or not...old credit accounts

I just came across this as part of an article on MSN Money: (surprise to me!)

DON'T CLOSE OLD, PAID OFF ACCOUNTS

We used to tell people to close accounts they weren’t using. Now here’s the word from direct from Craig Watts, an executive at Fair Isaac & Co., one of the leading credit scorers: “Closing accounts can never help your score, and often it can hurt.”

This knowledge is frustrating to those who want to simplify their lives and reduce the opportunities for identity theft by closing unused accounts. But credit facts are credit facts.

Shutting down credit accounts lowers the total credit available to you and makes any balances you have loom larger in credit score calculations. If you close your oldest accounts, it can actually shorten the length of your reported credit history and make you seem less credit-worthy.

Of course, perhaps you can afford not to care too much about the effect of closing an account. If you don’t use your cards much and your score is already high, the damage caused by shutting down more recent unused accounts will be minimal and may be well worth the peace of mind.

If you do carry balances or charge a lot, however, leave all your old accounts open, especially if you’re about to apply for new credit.

Tip: Keep all this in mind the next time a department store clerk offers you a 10% discount for signing up for a new card. Each new account can put a small ding on your credit score, and offer a new opportunity for credit thieves. Since closing accounts can hurt, it’s better to apply only for credit you really need.

Here's the link to the whole article about beefing up your credit score: http://moneycentral.msn.com/content/...D=38052#Rating

[sbsake]

Re: To close or not...old credit accounts

Since the last post is a partial truth ,,,,,

You need to pay attention to detail .... you want a high available credit and show monthly activity on balances

Also if the acct has late marks or anything you want to resolve this before closing

[PRICEPLUS]

Re: To close or not...old credit accounts

I always thought the rule of thumb was to pay them off but not close them!

[sbsake]

Re: To close or not...old credit accounts

Paying off the loan doesnt hurt but you need to also look at the facts. If you have an acct that current 30 or more days past due and you pay it off the score will be rated on lst delq and you will get mark against you ,, just remember that CBR is like a fact sheet where your behavior is rated