Go ahead and cancel. It doesn’t hurt your rating, it hurts your FICO score, as does having too much credit. Exactly *why * and *how much * are secrets that the FICO dudes won’t share. Asshole racist fucktards. Are you planning on getting a new Mortgage in the next year? If the answer is “no”, then a small change in your FICO score won’t be a big deal. Dont sweat it.
I had started another thread recently (that didn’t do much) about why credit score information seems to be “double-secret-probation” type stuff.
Why on Earth should things like closing a credit account of your own volition cause a dip in FICO scores?
Why is FICO so tight with the information?
Even though the law now assures a “free” credit report, this process has been described to me as not easy, and often does require some payment to get everything you want. Why?
This sounds like the kind of thing we’d read about in a banana republic somewhere.
Annualcreditreport.com. Unless ‘everything you want’ includes a score and other extras, it is free.
My little story.
A few months ago my wife wanted an elliptical machine. The place that was selling them had a one year no interest plan, so we got one. As I always do with no interest plans, I divide the total cost by (amount of months in plan minus one) to account for any billing cycle issues or any other problems that might cause me to miss the last payment. Anyways, everything was fine for the first few months, then two months ago I made the payment, but someone apperently entered it TWICE (it only came out of my bank account once) and instead of deleting the second payment, they put CHARGED my account for the same amount. Now technically everything should have been fine, but it blew my financing deal. My statements had interest and past due amounts on them. Due to that and some other problems I had with that company, I’ll never do business with them again (the bank, not the excersize store) and I’m not sure if I would even buy something from a company that finances through them.*
*Okay, if the deal was good I probably still would…maybe. But I will never get a credit card/checking accound/loan/etc… from Wells Fargo.
It depends on which account you close. You want to keep the accounts with the longest credit history open. If you have two cards, one you’ve had 10 years and another you’ve had 2 years, and you close the 10 year one, your FICO score will take a dip. You want to have a record of longest possible credit histories.
Closing an account can also hurt your FICO score if it affects your income to debt ratio. If you have three cards with balances and you pay off one and then immediately close it, the available credit you had there is taken from the denominator of your income to debt ratio. Depending on the balances on the other two, this could hurt your FICO score.
Oh, and having too much available credit can, indeed, hurt your chances if you apply for another loan.
I shall now disabuse you of the notion that credit card companies care one tiny mouse dropping about being customer friendly. Of course they are going to apply your payments in such a way to make them the most money! These are for-profit entities, man!
I would keep at least one card open. (The one you’ve had the longest, and with an eye towards income to debt ratio.) And most certainly if you’ve got balances on them, keep them open until you pay them off. Many companies nowadays will up your APR significantly if you close the account with a balance on it.
Thats helpful thanks. I can keep the account open that I’ve had and just never use it. I was kinda looking forward to sending them pieces of the card. Instead I may send them a letter pointing out I’ve got zero balance and don’t plan on useing the account again until they improve my rates.
Why are folks talking about smaking small purchases or overpaying? Does that cost the company money?
What about what DrDeth said. Whats the basic difference between my FICO score and my credit rating?
I realize that but that policy seems beyond the pale. It’s not the first one I’ve encountered like that though. I think the thing to do as customers is educate each other and encourage companies to offer policies that attract customers. I try to write clear communication to companies rather than emotional rants and encourage them to change their policies.
Thanks for the input.
You can likely still do that. Get your free credit reports. However, you’ll have to pay a little extra for your FICO score- that’s anotehr thing that’s unfair- it’s your credit score based upon your credit report, and the Feds have ruled the credit reporting agencies must give you one free credit Report a year (+ another free one whenever you are denied credit based upon that report), but FICO has fought giving it’s scores out for free, even though the Score can be more important than the Report.
Here is a couple links to sites about your Score:
(warning- Pop-ups)
*In the United States, a credit score is a numeric representation of an individual’s financial credit worthiness as calculated by a statistical model. A credit score attempts to quantify the likelihood that a prospective borrower will fail to repay a loan or other credit obligation satisfactorily over a specified period of time. A credit score is based on the information in an individual’s credit report. Lenders such as banks and credit card companies use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate loss to bad debt. Examples of such uses include determining who qualifies for a loan, assigning an interest rate, assigning credit limits, and managing accounts that are already open (for example, treatment of accounts that are in default). The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system. While the most widely-known score in the United States is FICO (which is most widely used in the mortgage industry), there are many others, such as NextGen and Vantage Score.FICO is an acronym for Fair Isaac Corporation (traded publicly under the symbol FIC) and refers to the best-known credit score in the United States which is calculated using mathematical formulae developed by this company. The FICO score is primarily used in the consumer banking industry. Banks and other institutions that use scores as a factor in their lending decisions may deny credit, charge higher interest rates or require more extensive income and asset verification based on the credit score.
The FICO scores are designed to indicate the likelihood that a borrower will be delinquent within the next 24 months. No public information is available to determine what the scores mean in terms of statistics.
There exist several generally accepted algorithms for extracting the primary contributing factors to a low credit score. One or more of these algorithms is typically used to supply a list of reasons when a loan applicant has been denied credit, in order to satisfy the Regulation B requirement that specific reasons are disclosed. Some consumers feel these adverse action reasons are somewhat disingenuous, as the only determining factor for credit denials is a numeric score — the “reasons” are summed up only for the consumer.
Credit scores are designed to measure the risk of default by taking into account various factors in a person’s financial history. Although the exact formulae for calculating credit scores are closely guarded secrets, Fair Isaac has disclosed the following components and the approximate weighted contribution of each:
35% punctuality of payment in the past (only includes payments later than 30 days past due)
30% capacity used: the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
15% length of credit history
10% types of credit used (installment, revolving, consumer finance)
10% recent search for credit and/or amount of credit obtained recently
The above percentages provide very limited guidance in understanding a credit score. For example, the 10% of the score allocated to “types of credit used” is undefined, leaving consumers unaware what type of credit mix to pursue. “Length of credit history” is also a murky concept; it consists of multiple factors - two being the oldest account open and the average length of time an account has been open. Although only 35% is attributed to punctuality, if a consumer is substantially late on numerous accounts, his score will fall far more than 35%. Bankruptcies, foreclosures, and judgments affect scores substantially but are not included in the simplistic pie chart provided by Fair Isaac.
Further, Fair Isaac does not use the same “scorecard” for everyone.
As a result of the FACT Act (Fair and Accurate Credit Transactions Act), each legal U.S. resident is entitled to one free copy of their credit report from each credit reporting agency once every twelve months. This information is available at the government-sanctioned but credit bureau-operated AnnualCreditReport.com, by calling 1-877-322-8228, or by mailing the Annual Credit Report Request Form. To guard against inaccurate information or fraud more often than yearly, request only one report from a different credit bureau each four months. However, the free report does not contain a credit score. A credit score may be purchased at the time of access for a nominal charge.
*
Your Credit Report shows all your charge and similar loan accounts. Morgages, CC, Loans, and sometimes even Utility bills. To turn a very long process of how this is reviewed into a condensed version for laymen: someone considering your for credit looks to see- if you have had a credit history, have paid those bills within 30 days (so a *little bit * late, even though it may cost your a “late fee” won’t show up on your report), and have no “DeRogs” (charged off bad debts, bankruptcies, liens, collection accounts, etc). So, unless you are canceling your one and only CC, canceling a CC won’t hurt your report and even then it probably wont have any effect. You MUST monitor your Credit Report, at least on a yearly basis, to check for wrong or outdated info, or signs of ID theft, etc. You’re a moron if you don’t. Most Credit Reports will contain at least one serious error, if not monitored. And, getting that error off could take months, so don’t wait until the last minute.
Your Credit *Score * is based upon your Report. How exactly it is calculated is a deep dark secret. :rolleyes: Many odd things can cause your Score to go up or down a few points, for reasons that seem to defy rational reasoning. Canceling a card, opening a new account, having “enquiries” and so forth. But unless you are about to get a new Mortgage- don’t sweat those few points either way. As long as your Report looks good, you won’t have a problem getting credit. Even if your new grantor does order your FICO score, those few points either way won’t change his decision. Most Grantors that do use the FICO score have a cut off, not a sliding scale, and if you have generally Good credit, you’ll make that cut-off.
** EXCEPT** if you’re about to get a new Mortgage, when that loan rate is highly influenced by your FICO score, and the difference of a single FICO point can cost you a 1/4% difference on your Home loan- they DO use a “sliding scale” in other words. Savvy shoppers will - before they get that new loan- get their score and also get a Program or advise on how to increase that score- which can often be swayed by 10 points by some misc mumbo-jumbo and jiggling things around. Spending a hundred bucks could save you 1/2 a % on that Mortgage. :eek:
It is free to the extent of its name (once per year). However, there are three credit reporting companies: Experian, TransUnion and Equifax. All are required to make one credit report per year available to you free of charge.* Common wisdom therefore advises that you contact the companies four months apart in rotation so that you are relatively up to date with no charge to you. You can do this on line if you so choose. You should do it at least once with each company just to verify that their information is factual. I found minor typos, but it was eerie to find just how extensive their information can be.
*This requirement was being phased in state by state for a while. I believe that all states now mandate that this be made available, but check your state to be sure.
I used to mostly keep a credit card on hand for emergencies. I was quite distressed when I recieved a letter in the mail telling me that since I used it so infrequently, that they were going to start charging me $30 a month to have a card with them! That was cancelled, of course.
My new one I try to use a bit more frequently, and always pay off totally each month.
I started the account when I was single, added the wife’s name when I was married. Then I was divorced, had no balance & wanted her name off. Why couldn’t they just take her name off & lower my account balance?