Quick Question

[nmomma]

Two years ago, I had a decent credit score (720), bought a vehicle (financed), and 2 store cc and a MC. Had never been late on pmts, but sometimes carried a small balance.

 

I left my husband last year, and am just waiting for the divorce papers to be drawn up. About that same time, my credit score dropped to 590. I was told it was a combination of the divorce, my closing one of the store cards (I didn't use it anymore), and my racking up the charges on the MC (totally unavoidable, but I still feel bad about it ). Anyhow, I'm slowly digging myself out of the divorce-debt, and have paid off the other store card (Sears card, 28% interest). I want to close it, as I won't use it anymore, but am worried it will have yet another negative impact on my score. It's my oldest account, and they just raised the limit on it (they had dropped it by 75% when my score dropped). Long term, is it going to matter if I close it or not? It would leave me with just one card, the MC.

 

My goal is to be in a position to buy a house in the next five years, and I don't want to do anything that will jeapordize that, but I also don't want the temptation of another card lying around!

 

Any thoughts?

[Handsome Rob]

I'm not the best guy to give advice, as I've just gotten started in this stuff as well, but I'd figure you're going to take a big hit because:

 

A) You're reducing your percentage of credit utilization. For a higher score one wants as much credit available as possible, with a smaller balance actually owing.

You say it is your oldest account, so buy closing it you are likely going to really shorten your active credit history.

 

Again, I'm new as well You really want to talk to Stu P. or Quasei, but good luck either way.

[Stu.Padaso]

Handsome Rob is correct. Leave it open. If it's your oldest card then it's helping your score.

[nmomma]

Thanks!

 

So should I keep it open and use it now and then so it stays active, or can I just file it away?

 

My 2nd store card has only been open for about a year, would I be okay to close that one? I only ever used it once (for the 20% first-purchase discount on a large ticket item), and have no plans to use it again.

 

(Sorry for the silly questions, this is all kind of new to me!)

[Quasei2]

I agree with what's been said here. I'd use your longest card for something now and then. If you have perhaps insurance or something that comes out monthly or a subscription of some sort then that's a good way to sock drawer a card while still using it and ensuring it stays active. It also means you get a monthly statement to remind you the acct still exists. Not getting a statement means you might forget about it and not use it within a year. A lot of places will close accts that are dormant for more than a year, some at the 16 month point, and others at the 18 month point.

 

Your 2nd store care you're probably ok to close if you're really bent on getting rid of it. Is it a store that you could perhaps convert it to a Mastercard option instead? It would be unusual, (I have heard of it happening especially now when the smaller banks are falling over themselves to keep customers and make anything off them they can), but if you're able to switch it to their Mastercard you might be able to get a low rate balance transfer option which would let you transfer some of the balance from your other Mastercard at a lower rate which would allow you to pay it off faster. By the end of the balance transfer promo hopefully your other Mastercard might offer you a promo to bring the balance back. If the option exists to switch I might recommend you do that since you already have the credit approved. You're looking toward a mortgage so you'll want to show not just a clean report, but that you have credit and are responsible with it and not just from one source.

 

Rob also raised another important point - if you close this card it will raise your total utilization across your cards.

 

And these are not silly questions at all! That's what this board is here for - so we can all share what we know and learn together.

 

One note... divorce in and of itself does not specifically impact your credit, it's the fall out from it that does - having to split up accounts, change in utilization, increased debt load, etc.

 

Q

[nmomma]

They're both cards that can only be used for purchases in that particular store, pretty much. Does the company closing the account reflect poorly on me, as opposed to my closing it?

 

I've also heard that banks look at your access to credit when evaluating you for a mortgage, is that true? As in, you could have $30,000 in available credit, none owing, but they'll take into account that you could spend that $30,000 and then have to pay for it? Did that make sense?

 

Yes, the actual act of getting divorced doesn't impact your credit, but the fallout sure does! lol

[Handsome Rob]

I'll try my best with this:

 

I don't believe that it will make any difference who closes the account. The difference being, that a closed account that isn't an active tradeline will lower you're FICO score. It's in the numbers, not certain what weight the profile score will carry.

 

From what I have read, the same apply's to credit utilization. What FICO really means, is the probability of you defaulting or defaulting again. Thus, $30K of available credit means that:

1) You aren't carrying a burden of debt that is going to challenge your ability to pay other debts.

2) You're creditors trust you and don't believe you will default again, no reason a new creditor wouldn't believe the same based on FICO scores.

 

Again, I'm new here, so double check me against the others.

[Quasei2]

They do look at how much outstanding available credit you have, but if that's something that will stop you from getting a mortgage with them they'll usually let you know. They will also usually let you know that if you drop your total limits to $XXX then you'll be able to get a mortgage from them. The more available credit you have the more potential risk you are to them; however, if your available credit fits just fine within their lending patterns/allowances then the risk won't be any issue. So the answer to your question is a maybe, leaning toward a probably.

 

As for whether you or the company closing it reflects differently, well yes. If it closes because it's inactive then usually the lender will put it at consumer's request. When a future lender looks at an acct and sees closed by credit granter they'll usually ask the question of why did they close this acct on you. Be up front about the why with them. If you screwed up and decided that the cloud patterns in the sky told you not to pay your bill that month then be honest and tell them that.