I’ve heard that to keep your credit rating up, once you’ve paid off a credit card that you should keep the account open.
So, about 4 years ago all my credit cards were paid off completely and I haven’t used a credit card since. But now I have about 6 credit cards sitting in my safe unused, they send me new ones when they expire, they barrage me with junk mail and blank checks, and I have to monitor them to make sure no one got a hold of the number and is making fraudulent charges.
I would really prefer to cancel them all, cut them up, and be done with it.
Would it really be that detrimental to my credit to do so?
It depends on what you consider detrimental. If you do not plan on using credit cards ever again, and plan to pay cash for things going forward, close them. Your credit score will drop, but so what? You will not be using your credit score any more, so what difference will it make? There are companies that will give loans based on things other than your credit score, using such things as your employment history and your income.
Or close all but one.
Credit advice is always messy so take this with a grain of salt…
Right now, with 6 “clear” credit cards, you probably have too much credit. If you went to apply for a loan the lending body could say “well if I give him this $100,000 he could just rack up $50,000 in debt on his 6 credit cards, blow all his income paying those back and I would never get my money back!” and deny you the loan.
You’d actually be in better shape if you had 6 cards carrying a balance, not having all of that “open” credit around.
However…I’ve also heard you need to keep your OLDEST credit card open. Having “old” credit is good for having “established” credit. I do believe I learned this from Suze Orman.
When I was getting serious about my credit score I did just what you are thinking - formally closed all of my cards but one (and followed up with my credit reports to make sure they were actually closed). I kept my oldest card, which I still have and still use. My score was about 780 when I went to buy my house a few years later.
So you can safely close all your cards - just keep the oldest one.
That sounds like a plan. I already have paid off 3 cars and a motorcycle and am in the process of paying off another car, have a mortgage, and have an open credit line of some $70K on the equity of my house so I guess I don’t need the cards for any forseeable reason.
All other things being equal (age of account, etc), is it the number of credit cards you have, or your total available credit limit?
Would someone with five cards with a limit of $2000 each (total available credit $10,000) have the same credit score as someone with a single card that has a $10,000 limit? On the one hand, an analysis like the one laid out by ZipperJJ would show those two scenarios as being identical. On the other hand, the multiple card scenario would (I’d think) provide more data to the lender about your payment habits: in the first one, there are five different banks providing information about any late vs. on-time payments, in the second, there’s only one.
One rule of thumb I seem to remember (although sadly I can’t remember where I heard it) is that the best balance is to have two or three open credit cards. I think you also get a small boost to your credit score if those cards show some activity (rather than sitting at a zero balance for years). But that may just be some garbled information sitting in my head, I don’t have a cite for them.
You’ll take a temporary hit right after you close an account. So don’t do this in the few months before applying for a loan. With that caveat, I’d agree with the previous posters–close all but the oldest account.
I hear that all the time, too, but I tend to doubt the veracity of it. Anytime FICO scores are explained or the online site gives me an explanation of my credit rating, it talks about length of credit history, not about the age of your oldest account. Your history isn’t automatically erased because you close the oldest account. Maybe the history of that account will drop off, but the length of your credit history shouldn’t change, right?
I seem to always get maximum points of length of credit history. For me, that’s got to be about 17 years. I certainly don’t have anything on my report from that long ago. Anyone got the real skinny on how this works? Amounts of time, and such?
My credit score shot up considerably when I closed three open-but-unused accounts at a single bank early this year. The amount of credit I had available is staggering, especially when I look at myself 8 years ago! It’s still considerable, but I look a lot less risky now. Of course my backup plan of “take cash advances on everything and head to Mexico” is now screwed if I ever need to flee.
sorry for the hijack, but in one of these many credit threads, we were told to make sure we got our REAL fair issac score from some (government based?) website. Anybody remember that?
I assume it’s www.annualcreditreport.com. That’s the official one that will let you get your 1/year credit report from each of the agencies, but not your actual credit score. That, AFAIK, you have to pay to see.
Of course, the ethics of these three companies controlling every American’s financial future is one for GD, as is the ethics of only being allowed to see the report for free once per year, and never getting your actual score for free. Ummm…it’s MY credit, why the fuck can’t I see it whenever I want? No, seriously, I’m actually interested in the laws behind why they are allowed to not let me have access to my own credit.
If you want to get your real FICO score, you’ll have to pay but I think it’s totally worth it to know where you stand. If you go to this thread on the creditboards, you can get a 15% off and it’ll be $38.28 for your score from all three credit bureaus. The website to get your scores is myfico.com and the first time you log on, you do have to jump through some hoops to establish your idenity. (mostly things liek remembering old addresses and employers)
Re. the OP’s question. Among things like late payments, the FICO score takes into acount the average age of your accounts. So a bunch of recently opened accounts will ding you and having older accounts helps. But I don’t think those accounts have to be open.
The FICO score does look at the percentage of your revolving blalances to your credit limits. So if you have a balance at all, it’s actually better to have more available credit to lower that percentage. The old advice about not having too much open credit is no longer true, the lenders are more interested in seeing that you use the credit you do have wisely.
Directly from the MYFICO website:
From what I’ve read, this is where Capital One credit cards screw you up. The average Visa card reports your balance and your total available credit. So you might owe $500 on a $10,000 credit line. Capital One only reports your balance, which then also shows up as your total available credit on that card. In effect, it looks like that card is always maxed out.
Yeah, Citibank does this too. There’s lots of pitfalls out there and you can save thousands by educating yourself about your credit.
Back to the OP, here’s an article from CNN money called 6 way to kill your credit score. It outlines briefly putfalls to avoid and specifically mentions that having too little open credit can impact your score negatively.
A few things: yes, canceling CC can hurt your FICO score, but only by a little. But do you care about your FICO score? You FICO score is not your Credit Report, where mainly “Derogs” hurt your credit- things like paying later than 30 days, defaulting, Collection accounts, etc.
For most dudes, a small temporary dip in your FICO score won’t mean a thing. If you are about to get or refi a Mortage (which rely heavily on FICO scores) where even a 1/4% can cost your thousands, then* hell yes, *you care.
Now, I don’t want you to get the impression that a low FICO score is nothing for the averge non-new-Mortgage loaner to worry about- a* really* low FICO score can hurt lots of things- even your ability to rent an apartment, sometimes. But a tiny temporary hit of a few points won’t do that.
Get your credit report, make sure there are no errors- *there likely will be. * (If you don’t check at least once every couple years). Those errors are going to be hwaaaay worse than closing an account. Leave your oldest/best CC open.
Don’t worry about closing a few; I closed 5 cards (around 1/3) and there was no noticeable “dip” in my score. They were newer, smaller limit cards, sure. And I closed my Capital One card, too. :rolleyes:
I really think that most of the worry about closing accounts is bought and paid for by the CC industry, which of course wants you to never close an account. That’s my wild-assed conspiracy theory anyway. 
Cap One has changed this policy and will report credit limits, if they’ve not already.
To the OP’s issue:
Well, try to keep them open, or keep 1-2 of the best cards and keep a decent limit on each, wherein decent is fairly ‘high’. If you keep a low ratio of debt vs. the limit, this is good.
If you have one card with a $500 limit, and you have 400-500 in balances, you are running pretty high balances vs. that limit.
And think like this (like the guy lending you his money): If you want to borrow 15k for a new car, how much confidence should you, as a lender have in someone when all they can demonstrate is the ability to pay off 400 bucks? If you were putting 4-6k on a card with a 20k limit, and paying those debts of in reasonable times, a lender will have a scoring model that, in all fairness, gives more points to you.
And, it ain’t ‘your credit credit report’. It’s the bureau’s report about you. And you do have a right to see it, and you have a right to see their scoring model’s assessment on you. But many lenders have their own models.
Credit granting is a big joke, huh? Well, as soon as everyone starting ignoring credit reports and started devaluing all the scoring models, a whole shitload of consumers were given money they normally wouldn’t be given, and now many of them are just fucked. If the old scoring models were used, a big chunk of the mortgage industry’s fake boom wouldn’t have happened, and there’d be a lot fewer forclosures and other horror stories.
Suddenly, all the mortgage companies are using the scoring models and sticking to them, which will save their asses and the consumers’ asses alike.
I hope it’s not GD’able, and this should be a factual answer. It is your credit, and you have your history. You keep track of your entire credit history, right? You don’t need to use any of these companies to see your history – you made it yourself. The credit bureaus should have the same information you do. The difference is, the people that you do business with (as creditors) let the bureaus know what’s going on. It’s their data now. You can control this data; don’t use companies that report to the agencies. Ah, but how do you know that your creditors are reporting correctly? Now’ve you’ve got a very good point, and that’s why the government stepped in gives you access to your credit report once a year. From what I remember, at least two of the three big agencies already did so, but it was all paper-and-mail based. Oh, but you want to see the FICO score? But that’s not yours. You didn’t do any of the work in aggregating all the data, and didn’t develop a fancy algorithm for calculating it. In any case, you already know if you’re a responsible person with good credit or bad credit. There’s no practical need of knowing your FICO score on a daily basis. If you’re rejected for credit or charged a higher interest rate due to a bad history, you’ll receive an explanation. People didn’t worry about FICO scores until it became known they existed, and we all got along.
But when you’re applying for credit, your FICO score is pretty much all most lenders look at. So it definitely behooves you to know what’s going on with it and how to maximize it.
Here’s a recent example from my credit report. I checked it yesterday 'cause this thread made me realize I hadn’t in a long while. The only new recent activity is a Discover card I recently opened. I had an inquiry on two out of three credit bureaus. Experian stayed the same, Transunion dropped 13 points, and Equifax (with no inquiry) rose 12 points. Fortunately for me, I’ve gotten my score high enough that a 13 point drop isn’t a huge deal but that’s the result of one new credit card. If I were borderline on the scores necessary for a mortgage or a car loan, that drop would push me down into a higher interest rate.
Got a cite for this? Most CC lenders seem to lend on Report alone, unless it has changed in the last couple of years? 
Running a real actual FICO report costs a fair amount extra.