Question about credit card and credit score

[thurgood]

Hello all,

Imaginary situation: I have a low credit score (I don’t know, say 300-400) because of some trouble on one of my credit cards. Maybe it was maxed out at one time and I had trouble even meeting monthly minimum payments, or whatever, but this is the card that is responsible for my low score. I now delete this card from my bank account. I imagine there is no way that the record of activity on this credit card will disappear from my credit score/rating and that all of a sudden my credit rating would zoom up. I mean there must be some record of this that will not die for some time.

My real situation: I have a decent credit score (750+) and I have three credit cards. At the time that I applied for my oldest card, about 13 years ago, I was unemployed (still am at the moment) and the bank issued me the card only by my “pledge”, a deposit of $1000 into the account that could not be touched. It was locked as security for the card. I also have two other credit cards issued within the past 2-3 years from different banks.

As I Look at my credit score, I seem to see that one of its major components is length of time possessing and using a credit card. At the moment I would like to avail myself of that $1000, free it up for use, by removing that card from the account, withdrawing from that credit card, deleting its existence,,, How would that affect my credit score? Is the (positive) data from that card also in “memory” to affect positively my credit score, or should I expect a drop in score? thanks

[disneysteve]

Cancelling that card will drop your score a bit as it will shorten your average credit age. I can't tell you how much it will drop but keep in mind that the drop will be temporary as with each passing month, the average age of the remaining credit history gets longer. That does not mean it will take 10 years to get back to where you are though because it isn't a linear calculation like that.

Also, your credit cards are not the only things that make up your score. Other creditors like car loans, student loans, mortgage, utility bills, rent, etc. can all contribute to your score.

Unless you are anticipating applying for a major loan, like a mortgage or auto loan, in the near future, I would close the secured card and get your $1,000 back. If you are applying for a loan soon, get that settled before you cancel the old card.

[thurgood]

Cancelling that card will drop your score a bit as it will shorten your average credit age. I can't tell you how much it will drop but keep in mind that the drop will be temporary as with each passing month, the average age of the remaining credit history gets longer. That does not mean it will take 10 years to get back to where you are though because it isn't a linear calculation like that.

Also, your credit cards are not the only things that make up your score. Other creditors like car loans, student loans, mortgage, utility bills, rent, etc. can all contribute to your score.

Unless you are anticipating applying for a major loan, like a mortgage or auto loan, in the near future, I would close the secured card and get your $1,000 back. If you are applying for a loan soon, get that settled before you cancel the old card.

Ok, thanks. Not planning any major credit moves

[disneysteve]

Ok, thanks. Not planning any major credit moves

Then I wouldn't worry about the impact to your score. Your score is great and will recover with time. Ditch the secured card. It served its purpose at the time. Now you can move on.

[thestrongprofessional]

Credit score rating

Hey thurgood,

According to Fair Isaac, the makers of the FICO score, the weights of the various criteria that they look at are: 35% payment history, 30% amount owed, 15% length of history, 10% new credit, 10% types of credit used. As you can see, your payment history makes up a decent chunk of your score so eliminating that credit card would have an impact on your overall score. I would reach out to the bank and see if you would be willing to free up some of that cash without eliminating the credit card. It never hurts to ask.

Raphael

[thurgood]

Hey thurgood,

According to Fair Isaac, the makers of the FICO score, the weights of the various criteria that they look at are: 35% payment history, 30% amount owed, 15% length of history, 10% new credit, 10% types of credit used. As you can see, your payment history makes up a decent chunk of your score so eliminating that credit card would have an impact on your overall score. I would reach out to the bank and see if you would be willing to free up some of that cash without eliminating the credit card. It never hurts to ask.

Raphael

I did reach out to that bank (well, Credit Union) last year saying that I had been about 13 years as a good credit card citizen, always paying my bills on time, etc., my credit score was high... They replied that my income (Social Security payments) was not sufficiently high to warrant a removal of the pledged money.

I don't mind losing this card and freeing up the money. At the time it was the only credit card I had. Now I have a few more that are better, giving me some cashback on purchases, etc.

The reason I proposed the question here on the forum is that I am pretty resolved in my decision to eliminate this credit card and was interested in learning from more experienced folks the effect it would have on my general credit score. thanks

(ah, one extra thing... If my payment history was really negative, losing the card would not eliminate this history, so why would the positive disappear?)

[Eagle]

I did reach out to that bank (well, Credit Union) last year saying that I had been about 13 years as a good credit card citizen, always paying my bills on time, etc., my credit score was high... They replied that my income (Social Security payments) was not sufficiently high to warrant a removal of the pledged money.

I don't mind losing this card and freeing up the money. At the time it was the only credit card I had. Now I have a few more that are better, giving me some cashback on purchases, etc.

The reason I proposed the question here on the forum is that I am pretty resolved in my decision to eliminate this credit card and was interested in learning from more experienced folks the effect it would have on my general credit score. thanks

(ah, one extra thing... If my payment history was really negative, losing the card would not eliminate this history, so why would the positive disappear?)

I believe your positive credit card history only remains on your credit history for 2-3 years. Late payments and no payments last a lot longer. That's how credit works.

I cancelled my oldest 2 cards through Capital One. I took a hit of say 10 or 20 points. However, my credit score climbed up again.

Really, your credit score has no value per say. All that really matters is how your credit score helps you. In this case, the real benefit is getting a credit card that gives you cash back, mileage, or some other rewards.

For example, we have an AMEX that gives us 6% cash back on groceries and 3% cash back on gasoline. We buy a lot through Amazon (we have kids) and so we have the Amazon Chase Visa that gives us 5% cash back on Amazon purchases and 2% on restaurants. We budget for our expenses and pay the bills off every month.

Are you thinking about purchasing a house? Or maybe purchasing a vehicle on a care note?

If not, then cancel the card.

[thurgood]

I believe your positive credit card history only remains on your credit history for 2-3 years. Late payments and no payments last a lot longer. That's how credit works.

I cancelled my oldest 2 cards through Capital One. I took a hit of say 10 or 20 points. However, my credit score climbed up again.

Really, your credit score has no value per say. All that really matters is how your credit score helps you. In this case, the real benefit is getting a credit card that gives you cash back, mileage, or some other rewards.

For example, we have an AMEX that gives us 6% cash back on groceries and 3% cash back on gasoline. We buy a lot through Amazon (we have kids) and so we have the Amazon Chase Visa that gives us 5% cash back on Amazon purchases and 2% on restaurants. We budget for our expenses and pay the bills off every month.

Are you thinking about purchasing a house? Or maybe purchasing a vehicle on a care note?

If not, then cancel the card.

Thanks for the contribution. No, not planning on either house or car purchase. And, cancelled the card the other day and freed up the cash. Wow, that is one insane AMEX credit card. Who do I have to kill to qualify for something similar?

[Eagle]

Thanks for the contribution. No, not planning on either house or car purchase. And, cancelled the card the other day and freed up the cash. Wow, that is one insane AMEX credit card. Who do I have to kill to qualify for something similar?

There's an annual fee associated with the card of $75 or $100. However, we got a "free" year of Amazon Prime ($100) when we signed up.

You can always see if you qualify here: https://www.americanexpress.com/us/c...ash-preferred/

[thurgood]

Update... not sure how long these things take to enter into the pipeline. But so far it's been one month and I have lost 5 points (only) on my credit score.