Credit Cards: keep ''em open or close them

[janinegirly]

I have quite a few cards that are dormant--basically opened them up for air miles, and I really don''t like having all these cards. However I''ve heard the conventional wisdom is that it''s better to leave them dormant for credit purposes and that closing them actually hurts your credit #,etc. Anyone know the best way to handle this..at what point does it make sense to close some down? I have no problem disciplining myself and not using them, just hate having credit lines open that I don''t need.

 

[neatfreak]

If you don''t need credit anytime soon for a car, house loan, etc. AND you have PLENTY of open and available credit (i.e., your cards are nowhere near maxed out), you could go ahead and close one of the old cards every few months if you really want to.

Personally I would still keep open the oldest one and start closing them from newest to oldest because the older ones have a more established history.

Just my own thoughts-I am not an expert.

 

[DivaDiamond007]

I''d tread carefully. Closing the accounts lowers your debt to available credit ratio, and therefore your score. However, cc companies are wacky these days and you may find that your account gets closed by the creditor for non-use, screwing your score in the process. How many cards are we talking about? If it''s only a few major cards then I''d rotate them per month to keep them active and close any store or specialty cards. Most importantly, pay off your debt and after that rotate your cards and pay them in full when the bill is due

If you don''t want to rotate usage then start by closing the newest card and work backwards from there. The longer an account is on your report the more history you''ll have, and if it''s good history it will help your score.

If you have some debt then you can snowball it to pay it off faster, closing the account when the card is paid off. Start by paying the maximum possible on your highest interest card, and paying only the minimum on your lower interest cards. When the first gets paid off, "snowball" that payment into the card with the next highest interest rate and so on. You won''t have much spare cash if you do this, but your prompt payments will help your score in the long run and you''ll dig out of debt.

Hope this helps!

 

[Abril]

Most of the air miles credit cards have annual fees. If you''re not using those cards, I would cancel them, especially if they were opened more recently and don''t have a long credit history attached to them, and they have a low credit limit. Shouldn''t hurt your credit score too badly if those things are true. Plus you don''t have to pay that pesky annual fee.

 

[MichelleCarmen]

2nd. If you close accounts, your credit score may lower.

FWIW, I have a number of cards that have sat dormant and two of the department store cards ended up lowering my credit limit. The first was Macy's, then about two weeks ago, I called my JC Penny account (which I only opened to buy furniture and long since paid it off) and they had lowered my credit line, to get this $124! Before it was around $3,000. Strange. . .what can one buy for $124 these days? lol

Now, I'm rotating through my cards. A few months back, I bought something on my Nordstrom card (don't even remember what), and also some socks from Macy's, to make sure my accounts are still listed as active. Gotta find something at JC Penny's now!

I didn't even use my Visas, but now am buying gas with them.

My advice is to keep the accounts open. Set up a file in your filing cabinet with your cards put into a file (inside an envelope so they don't fall out) and every few months, trade out one card for another. That's what I'm doing and it's easier than trying to cram all my cards into my wallet.

 

[Allison D.]

The trick about CCs is you don''t want too few NOR too many.

If you don''t have enough lines of credit, your score can be affected. However, if you have too many lines, it can negatively impact your credit too. If you make $50k a year and have collective credit of $150K among your cards, that can work against you because you''re a higher risk to get in over your head quickly.

If you find yourself in the latter position and decide to close some cards, keep in mind that older lines of credit history are the most valuable, so those are the ones to keep.

Also, consider how much of the available credit you typically use on a given card because using too high a percentage of the credit available works against you. It''s better to carry a $1K balance on a $5k limit card than on a 2K limit card (20% debt load instead of 50%).

 

[trillionaire]

conventional wisdom is to keep old accounts open!

 

[janinegirly]

Thanks everyone. I have 4 active credit cards--I guess that''s not a huge amount. I have no debt (except mortgage) and all cards have been paid in full from the get go. I did shut down some store ones--just hate having those sitting in my wallet for no reason and don''t want to be bothered with buying an item from a store just to keep it active. Only one of my cc''s has an annual fee and I''m quite sure they''d switch me to a non-fee card if I said I''d be shutting down. However that usually entails closing one card and opening another (a non-fee one), so probably better off just shutting down since it''d show as a new card even though there''s history there.

 

[HollyS]

Close them. Your credit score will go up.

 

[gemgirl]

I just saw Suze Orman on Oprah a few weeks ago and she stressed not closing any credit card accounts now because you want your debt to credit limit ratio to be as healthy as possible. I know this flies against all previous wisdom, but she said that the credit market is changing and all of the companies are playing by brand new rules since the recession. I''m sorely tempted to close a few myself, and especially to lower my ridiculous credit limits on some, but I''m not going to. Not now.

Don''t do anything to hurt your credit score now. Leave them open, try to charge something on each of them every once in a while and pay your bill right away.

 

[neatfreak]

Date: 8/3/2009 4:14:21 PM
Author: HollyS
Close them. Your credit score will go up.

This is not true for many people...

 

[gemgirl]

From the Oprah website. Suze Orman''s 5-step Financial Action Plan-
http://www.oprah.com/article/money/personalfinance/pkgyourmoney/20081119_tows_suzesteps/1


You can watch the webcast of Suze''s latest Oprah show by clicking here-
http://www.oprah.com/package/money/personalfinance/pkgyourmoney/20080105_sas_yourmoney




Suze says there are three ways you can start improving your FICO score today:

1. If possible, pay more than the minimum every month on your credit cards. "If you''re charging on your credit cards and all you''re doing is paying the minimum, the credit cards are afraid now that you''re not really being very smart with your money," Suze says. "And since you can''t, it''s not the FICO score that they''re looking at to choose to close down your credit cards. It''s the fact that you''re paying just the minimum, and those are the cards that they''re closing down."

2. Pay your bills on time. "Paying your credit card bills on time essentially counts for 35 percent of your FICO score," Suze says.

3. Never go over your credit limit. "That''s when they start to raise your interest rates, close you down," Suze says.

Another thing to keep in mind: Suze says to never close down a credit card. "It will hurt your credit score," Suze says.

 

[snlee]

Keep them open! Closing them will hurt your FICO score.