| To close or not to close cards??? THAT is the question... |
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mchnhed
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| To close or not to close cards??? THAT is the question... |
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These issues have been bugging me for quite some time now. After reading up on multiple personal finance websites and articles, I have yet to be led in the right direction. The main question are:
1) Is it possible to cancel a credit card without it affecting my credit score negatively?
2) What's the prime # of credit cards i should have?
One website (HowStuffWorks) i've been reading up on says...
"According to TransUnion and Experion, you should not close out your oldest card, because it has the most history on it; also, you should maintain four to six credit cards to "keep your credit score and debt balances healthy" (TransUnion). But other than that, close the accounts you don't use. In addition to avoiding excessive available credit, you're limiting your exposure to indentity theft."
Is this information correct? I've read other sites that "you should only keep around 2-3 credit cards" and other ones that state "you should never cancel any credit cards because it will look bad on your credit report". However, it seems to me that the advice on HowStuffWorks is most pragmatic because i could get rid of cards that have an undesirable interest rates/procedures and switch to better companies if i desire to do so. (I do understand that no matter what i should try to keep my debt-credit ratio at/below 25%.)
So, as stated above, what I am looking for is the following...
1) The prime credit card range (how many i should have)
2) A way to cancel credit cards without it affecting my credit score/report negatively
Thanks so much in advance - anyone who is qualified to address my issues.
MY DOMAIN: Martello Solutions (FERRARI, anyone?)
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Tue Aug 16, 2005 4:17 am |
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sayyes
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I've always felt that 2-3 credit cards are best. I currently have three (not counting, of course, my debit card) and find that it's enough to keep track of. I have two that I use very frequently (a Discover that gives me cash back and an airline miles Visa that I use when vendor's don't accept Discover). I make sure to pay the balance off on these cards as the interest rates are high.
I have another card that I never use that is for emergency purposes only. It has a low interest rate and no perks.
So, to answer you question about how many, I would agree with 2-3.
I don't believe there is a way to cancel your credit cards without it negatively effecting your credit report, but I would cancel the cards that you've opened most recently. Credit companies like loyalty; they are giving you money and want to make sure that you're going to pay THEM back rather than refinancing the loan. So, if you're going to cancel some cards, try to cancel the ones that you've held for the least amount of time.
That being said, credit companies also don't like to see you have TOO MANY credit cards. Think of it from their perspective: "I'm going to give this guy $X, and then he could run his credit cards up to $Y and claim bankruptcy!" They'd rather see you have a moderate amount of debt available to you rather than too much.
So, I wouldn't worry about cancelling your credit cards effecting your credit score too much.
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Tue Aug 16, 2005 3:07 pm |
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MattL
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| Re: To close or not to close cards??? THAT is the question.. |
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quote:
Originally posted by mchnhed
These issues have been bugging me for quite some time now. After reading up on multiple personal finance websites and articles, I have yet to be led in the right direction. The main question are:
1) Is it possible to cancel a credit card without it affecting my credit score negatively?
2) What's the prime # of credit cards i should have?
One website (HowStuffWorks) i've been reading up on says...
"According to TransUnion and Experion, you should not close out your oldest card, because it has the most history on it; also, you should maintain four to six credit cards to "keep your credit score and debt balances healthy" (TransUnion). But other than that, close the accounts you don't use. In addition to avoiding excessive available credit, you're limiting your exposure to indentity theft."
Is this information correct? I've read other sites that "you should only keep around 2-3 credit cards" and other ones that state "you should never cancel any credit cards because it will look bad on your credit report". However, it seems to me that the advice on HowStuffWorks is most pragmatic because i could get rid of cards that have an undesirable interest rates/procedures and switch to better companies if i desire to do so. (I do understand that no matter what i should try to keep my debt-credit ratio at/below 25%.)
So, as stated above, what I am looking for is the following...
1) The prime credit card range (how many i should have)
2) A way to cancel credit cards without it affecting my credit score/report negatively
Thanks so much in advance - anyone who is qualified to address my issues.
How many credit cards do you have? I have about 4-5 cards but I only use two of them. I like to have different types of cards, Amex, Visa, department store (Home Depot), etc. rather than a bunch of Visa and Mastercards.
If you only have a couple cards and you need to move balance to another card you may just want to open a new one and not cancel the old one.
If you really want to cancel you could call your company and tell them that your card was lost/stolen but you haven't been using it anyway. Ask them to lock the account but not issue a new card now because you won't be using it for a while.
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Tue Aug 16, 2005 4:10 pm |
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Kenstill
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This is news to me. Can someone explain why it's bad to close a credit card? I've opened and closed 3 or 4 over the years, as new, better options were presented to me.
I also keep 2-3 credit cards. Two are set up as overdraw protection on my checking accounts, and one that accumulates miles for plane tickets.
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Tue Aug 16, 2005 4:18 pm |
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MattL
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quote:
Originally posted by Kenstill
This is news to me. Can someone explain why it's bad to close a credit card? I've opened and closed 3 or 4 over the years, as new, better options were presented to me.
I also keep 2-3 credit cards. Two are set up as overdraw protection on my checking accounts, and one that accumulates miles for plane tickets.
The main reason is by having an account for a long period of time it builds up credit history and credibility.
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Tue Aug 16, 2005 4:28 pm |
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Estimator
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I suggest no more than 1 credit card. Unless you are not going to pay it off every month ( unwise not to at the interest rates they charge ) it just creates unneeded extra bills to mess with and more chance to pay a day late and get tagged for late fees and interest. Most cards will offer pretty darn hign credit limits so why more than one?
I have tried and then cancelled a couple of credit cards over the years and did not notice much if any change in my FICO score.
Just my opinion.
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Wed Aug 17, 2005 12:40 am |
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creditlovers
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I agree that you should not close your credit card accounts. A lot of people have been denied credit due to lack of matured accounts.
Instead of canceling the card, rip it up. If its ripped up, you cannot use it. If you do not want to rip it up, you can freeze them in your freezer. If you freeze them, they will be around for when you really need it.
Jus dont close your accounts.
New personal finance forum at http://talk.creditlovers.com. Please visit and sign up. I will answer your questions!
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Tue Aug 23, 2005 4:55 pm |
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Lambert
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| Re: To close or not to close cards??? THAT is the question.. |
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quote:
Originally posted by mchnhed
These issues have been bugging me for quite some time now. After reading up on multiple personal finance websites and articles, I have yet to be led in the right direction. The main question are:
1) Is it possible to cancel a credit card without it affecting my credit score negatively?
2) What's the prime # of credit cards i should have?
1. Don't let your credit score rule your life. The 2 main things a credit score accomplishes is letting lenders know they can make money off of you, and letting ID thieves know you're a worthy target. Live your own life on your own money, and your credit score will not matter as much. But if you insist, do like the other guys said, cut up the cards and quit using them
2. I'm pretty keen on ZERO!  You can do anything with a debit card that you can do with a credit card. Any one who tells you different is likely misinformed or simply addicted to credit. Live your own life with your own money and lay off the credit.
marC
Because the Law of Gravity Doesn't Apply to Credit Card Balances!
www.ExperiencingFreedom.com
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Mon Aug 29, 2005 8:32 pm |
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sayyes
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The only thing I will add to Lambert's advice is that credit cards can actually work for you, provided you pay off the balance every month.
Find a credit card that gives you benefits (I use Discover) and every time you use your card you'll earn points. I use my points to get movie rentals and to lower the amount I owe Discover. It saves me serious $$!
However, you have to make sure that you can pay off your balance EVERY MONTH! The cards that offer these deals often have EXTREMELY high interest rates (>20%), so carrying a medium sized balance for just one month can wipe out the benefits you gain from accruing points!
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Mon Aug 29, 2005 8:44 pm |
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mchnhed
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OK... I'm getting some VERY different opinions here. Some people are saying to cancel the cards with the credit card companies, others are saying to never cancel and to just stop using the cards, so i'm getting really confused here.
If i just stopped using the cards, wouldn't lenders (i'm shopping for a mortgage) look at that un-used credit as potentially dangerous (to rack up some bills)??? This is what i've heard as to why you should just keep your oldest card and cancel the others with the card company.
Just as Kenstill said, I just want to be able to close/open card accounts at will without it affecting my FICO score negatively. I'm not looking to rack up a bunch of debt here. Someone that knows what they're talking about - HELLLP!!!
MY DOMAIN: Martello Solutions (FERRARI, anyone?)
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Mon Aug 29, 2005 11:43 pm |
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sayyes
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quote:
OK... I'm getting some VERY different opinions here.
That's because this topic has alot to do with personal preference.
quote:
Some people are saying to cancel the cards with the credit card companies
Who said to cancel the cards? I think Lambert's post saying that he has zero cards is an answer to your second question about how many cards people should have.
quote:
If i just stopped using the cards, wouldn't lenders (i'm shopping for a mortgage) look at that un-used credit as potentially dangerous (to rack up some bills)??? This is what i've heard as to why you should just keep your oldest card and cancel the others with the card company.
I wouldn't worry about having 2-3 cards; it's when you start getting into the 5-6 range that I think they start to raise eyebrows. I would follow Lambert's advice not to let this rule your life. Have you been denied for your mortgage? Is that why you are so worried about this? Cancelling your accounts aren't going to change your score THAT much, so this is really not something to lose sleep over. It takes years to establish credit, so if you cancel (or don't cancel) 2-3 cards it's not going to make or break you getting a mortgage.
quote:
I just want to be able to close/open card accounts at will without it affecting my FICO score negatively
I just want a billion dollars. It's good that we have dreams...
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Tue Aug 30, 2005 1:10 pm |
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mchnhed
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Actually, you Chris, were the one who said i should cancel cards...
quote:
Originally posted by sayyes
... I don't believe there is a way to cancel your credit cards without it negatively effecting your credit report, but I would cancel the cards that you've opened most recently. Credit companies like loyalty; they are giving you money and want to make sure that you're going to pay THEM back rather than refinancing the loan. So, if you're going to cancel some cards, try to cancel the ones that you've held for the least amount of time.
I think i'll just stick to my original assumption and keep around 2-3 cards, but just cancelling the most recent ones (if i come across a better "deal") in order to have the longest possible established history.
Thanks for the help everyone.
MY DOMAIN: Martello Solutions (FERRARI, anyone?)
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Tue Aug 30, 2005 6:46 pm |
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Lambert
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quote:
Originally posted by sayyes
quote:
OK... I'm getting some VERY different opinions here.
That's because this topic has alot to do with personal preference.
Yep, Personal Finance is more "personal" than it is "finance."
It's not as much about the math as it is about what fits your life and goals. There are some key factors to consider, and everything else just kinda turns to opinion and preference.
marC
Because the Law of Gravity Doesn't Apply to Credit Card Balances!
www.ExperiencingFreedom.com
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Wed Aug 31, 2005 3:38 pm |
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$moneyman$
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| The answer is... |
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The best strategy is to close all your accounts, except your oldest credit card account - this means you should have no more that one (1) credit card. This account will have the most history, and will often be the prime indicator that credit companies and banks will use to determine your interest rate on future loans/mortgages.
You only need 1 credit card, so it does not make sense to keep all these other accounts open. By doing so, you are leaving yourself extra-vulnerable to identity theft. Don't worry about getting a negative score on your credit history... it won't affect your ability to get competitive interest rates as long as your payment history is good (ie, no deliquencies / accounts in default).
Hope all goes well...
Money doesn't stink and YOU are #1
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Wed Aug 31, 2005 6:34 pm |
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EBuchanan3
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| Re: To close or not to close cards??? THAT is the question.. |
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I just went through this recently before I bought my house. This is what I learned.
1) Is it possible to cancel a credit card without it affecting my credit score negatively?
From what I have read...yes. What should affect your decision to close a card is the total amount of the balances you carry and the percentage of the total balance compared to your total credit limit. I read on another website that you should keep the percentage under 30%.
Stay with me...
Say you have 3 cards with a combined total of $20K in credit.
Card A: $8k limit, carrying $5k balance
Card B: $6k limit, carrying $3k balance
Card C: $6k limit, carrying $0 balance
In this scenario you are using 40% of your total credit. This, according to what I have read is a bit high. Now you decide to clean up your credit and start by closing Card C so you don't use it. Now you have...
Card A: $8k limit, carrying $5k balance
Card B: $6k limit, carrying $3k balance
So now you are using 58% of your total credit and officially look more risky to creditor and lenders.
Personally I have 3 cards with about $10k in total credit and I don't use them for the most part (currently all have zero balances) and one of them is a JC Pennies card which I intend to close since I only got it to get 0% interest for 6 months when I purchased some furniture. Another thing to consider: when I went to apply for my mortgage, paying off the $1800 balance on my Visa garnered me $15k more on my loan pre-approval.
2) What's the prime # of credit cards i should have?
It's been awhile but I am pretty sure there isn't a magic number. I do recall that multiple places I looked for information warned about going over 7 or 8 cards as well as warning against having store credit cards (apparently they give them to anyone with a pulse).
Good Luck
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Fri Sep 02, 2005 3:39 pm |
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