Closing Accounts and Credit Score

In My Humble Opinion
1

A few years back things were tight, and I had to use my credit card quite a bit. I think the balance got up to about $15K. Once things got better, I stopped using it and put myself on an aggressive payment plan. I just made the final payment, bringing my balance to zero.

Until recently, I had planned to close the account once I had it paid off. I know this will cause a hit to my credit score, but I don’t really care. If I want something, I need to save up for it. If there’s an emergency, that’s what savings are for.

Except that now my girlfriend and I are looking into buying a condo, we’re prequalified for a mortgage, etc., etc. So I don’t want to do anything to badly hurt my credit score (which is about 750).

This is my only credit card, with Wells Fargo. I used to bank with them, until I was able to join a credit union. I’d really like to get away from WF altogether.

So here’s what I’m wondering about: being my only credit card, just how big of a hit to my credit score are we talking here if I close the account?

If I leave the account open, but the balance remains at zero, will this cause a hit to my score as well?

Something I’ve read is that the average age of credit card accounts also affects one’s credit score. I think I’ve had this WF card for about 12 years. If I were to get a card through my credit union, and close the WF card, the average age would go from 12 years to 0 years. What kind of credit score hit would I be looking at with this scenario?

I’ll probably wind up leaving the stupid WF account open for now, at least until we buy a condo. I’m just curious what others’ experiences are with this type of stuff.

2

Your available (unused) revolving credit is also a major factor in your credit score. You close that credit card and it goes down to $0. That will hurt your credit score in a major way.

Although it is not a part of your credit score, a lot of banks also like to see a six-digit credit line. That can be one of the non-credit score factors they use.

Look, you’ve got a decent credit score right now. If it ain’t broke, don’t fix it. Wait until after the new house sale has closed and the bank has paid out the mortgage money to the seller. Then go get a new credit card from your credit union. You will likely qualify for a better card (lower interest rate, higher credit line, better perks) if the old card is still open. THEN, if you absolutely must, close the Wells Fargo account. Although, I would recommend leaving it open and unused unless WF starts charging a fee or something. As a matter of fact, you should make a small charge every six months and pay it off immediately to make sure WF doesn’t close it for inactivity.

3

Nothing, at least for a while. A closed account continues to age until it falls off your report, which is 10 years, IIRC. I agree that you should just leave it alone until you’re out of escrow. Your credit score, as it is, is right on the threshold of getting the best rates and the tier below.

4

Don’t close the account. If you have sticky fingers, cut up the card.

In a true emergency, you will not have the cash immediately available, plus no guarantees to track the cash if things go wonky. In an emergency, you need a credit card. Just make sure that savings for an emergency is only used to pay off the card.