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
Cancelling your oldest card will negatively affect your credit score but it sounds like you are going to have to do it at some point anyway to get your money back. Your payment history will continue to exist after you cancel the card but length of credit history is a separate factor that is greatly affected by your oldest account.
It isn’t necessary to maintain a really high credit score at all times unless you plan on needing it for something like a loan fairly soon. How old is your second oldest card?
Or call the bank and ask them to release that money to you since you’ve had good credit for 13 years and they no longer have reason to guarantee your card.
Three and a half years of credit history from your remaining cards isn’t ideal but it isn’t that bad either. Length of credit history is only one factor of many and the payment history that you already established is more important. You are going to have to close that account at some point so you might as well do it now to get your money back.
BTW, www.creditkarma.com (free and legit) is a great tool to monitor your credit score, the factors that go into it and advise on how to improve it. I play it like a real-life video game and have ridiculously high credit scores because of it but that has negligible practical value. Anything over 720 is good enough for most purposes.
It can help you figure out how much your score will drop when you cancel your oldest card but I suspect it is less than you think and still well within the acceptable range.
I just looked at the credit score simulator on CreditKarma and here is what it said when I ran the scenario to simulate closing my oldest card.
"Typical Impact - Low
Closing your oldest credit card will lower your average age of credit history, which can be an important factor for your credit score. After a few months, the negative effects usually wear off."
If I could make a suggestion, before you going closing a credit card do whatever else you might need to do first. Now, I get the feeling you’re cash strapped AND working to either get yourself out of debt or keep yourself out of debt, but if you have any plans of buying/leasing a car, buying a house, renting an apartment or doing anything that involves someone looking at your credit report in the next year or so, you may want to do that first, before you do something that could ding your credit score. Whether that means doing it now, or putting off closing the secured card, I don’t know.
OTOH, if doing this now forces you to put something off for a year and that’s a good thing in your situation, sometimes that’s the self control you need.