Is it ever beneficial to close a credit card?

[kayvebear]

I have a lot of credit lines open.

 

(2) of them I am an 'authorized user' on, which were opened in 1990.

(2) of them are my own lines since 2003 or so.

 

The rest of them were opened in the last 1-3 years... they have horrible APR's, low limits, and I don't plan on ever using them again.

 

I have heard that you never want to close a line of credit as it is bad for your credit / score, but I have also heard that the average age of your line of credit (when it was opened) is a factor as well. I am now thinking it may benefit me to close my 6 month old Target card etc. to increase my average age of card's life.

 

Thoughts / advice?

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[kayvebear]

bump

[shootforthestars]

I believe that when you apply for a loan, having too much credit at your current disposal can work against you. You may want to look into that- it would be a reason to close your more current ones. Plus, there is the risk factor. If these are cards with terrible conditions, the small hit you may take closing them is probably worth the benefit of not risking getting caught in their terrible interest traps. I think I read the ideal number to have open is 2 or 4, so you have more than you need.

 

But then, I'm a credit card hater, so my advice may be biased.

[shootforthestars]

I believe that when you apply for a loan, having too much credit at your current disposal can work against you. You may want to look into that- it would be a reason to close your more current ones. Plus, there is the risk factor. If these are cards with terrible conditions, the small hit you may take closing them is probably worth the benefit of not risking getting caught in their terrible interest traps. I think I read the ideal number to have open is 2 or 4, so you have more than you need.

 

But then, I'm a credit card hater, so my advice may be biased.

[ChrisJ500]

Unless you are paying an annual fee, there really isn't much of a reason to close your cards.

The average age of accounts (AAOA) in the FICO score includes closed cards as well as open. If you have no negative marks it will continue to impact your score for 10 years, otherwise 7.

 

Do you happen to be an authorized user (AU) on an American Express, by any chance?

 

I would suggest you pull all three of your credit reports from www.annualcreditreport.com - this is the only site that you can legitimately obtain a free copy of your credit report once-a-year as required by law.

Pulling your own credit report will not impact your credit report.

 

You may also want to obtain one or more of your FICO scores from www.myfico.com, but that will cost you.

Link to FICO discounts

FICO scores are what are most used by lenders to determine your trade lines, APRs, etc. - but these are all based on what is actually contained in your credit reports.

 

I have a lot of credit lines open.

 

(2) of them I am an 'authorized user' on, which were opened in 1990.

(2) of them are my own lines since 2003 or so.

 

The rest of them were opened in the last 1-3 years... they have horrible APR's, low limits, and I don't plan on ever using them again.

 

I have heard that you never want to close a line of credit as it is bad for your credit / score, but I have also heard that the average age of your line of credit (when it was opened) is a factor as well. I am now thinking it may benefit me to close my 6 month old Target card etc. to increase my average age of card's life.

 

Thoughts / advice?

[fallencyi]

I have a lot of credit lines open.

 

(2) of them I am an 'authorized user' on, which were opened in 1990.

(2) of them are my own lines since 2003 or so.

 

The rest of them were opened in the last 1-3 years... they have horrible APR's, low limits, and I don't plan on ever using them again.

 

I have heard that you never want to close a line of credit as it is bad for your credit / score, but I have also heard that the average age of your line of credit (when it was opened) is a factor as well. I am now thinking it may benefit me to close my 6 month old Target card etc. to increase my average age of card's life.

 

Thoughts / advice?

 

From what I understand (I asked the same question 2 Weeks ago):

Depending on where you are with your Utilization closing them may impact you negatively, but if utilization is not an issue, then closing them should have NO other negative effect.

Any Card, Open or closed is factored in to your age of accounts. Not just the open ones as I had assumed. Closing that 6month card wont increase your average age & may hurt you based on having less available credit.

 

I would say, if your utilization % is not a problem and they have an annual fee, close them.

[PunisherSD]

I have heard that you never want to close a line of credit as it is bad for your credit / score,

Only if you have balances on said cards when you close them. When you close those cards those balances are calculated as apart of your overall credit utilization.

For example: You have two cards, one with a 1k limit and $500 balance. The other card has a 1k limit and a $500 balance. If you close one of those cards, you will have 1k of credit with 1k of debt -- which translates into 100 percent utilization.

So, the answer is that it only affects your score if you close a card with a balance, and ONLY if that balance increases your utilization beyond a certain point. The best score boost for utilization is 10 percent, followed by 30 percent. Anything over 30 percent and your score takes a hit.

but I have also heard that the average age of your line of credit (when it was opened) is a factor as well.

AAOA is indeed a factor, but both OPEN and CLOSED accounts are factored into this equation, thus your AAOA will remain unaffected if you close your accounts. Positive closed accounts will continue to report for 10 years.

I am now thinking it may benefit me to close my 6 month old Target card etc. to increase my average age of card's life.

Nope, sorry, this won't affect your AAOA.

[ChrisJ500]

Unless you are paying an annual fee, there really isn't much of a reason to close your cards.

The average age of accounts (AAOA) in the FICO score includes closed cards as well as open. If you have no negative marks it will continue to impact your score for 10 years, otherwise 7.

 

Do you happen to be an authorized user (AU) on an American Express, by any chance?

 

I would suggest you pull all three of your credit reports from www.annualcreditreport.com - this is the only site that you can legitimately obtain a free copy of your credit report once-a-year as required by law.

Pulling your own credit report will not impact your credit report.

 

You may also want to obtain one or more of your FICO scores from www.myfico.com, but that will cost you.

Link to FICO discounts

FICO scores are what are most used by lenders to determine your trade lines, APRs, etc. - but these are all based on what is actually contained in your credit reports.

 

I have a lot of credit lines open.

 

(2) of them I am an 'authorized user' on, which were opened in 1990.

(2) of them are my own lines since 2003 or so.

 

The rest of them were opened in the last 1-3 years... they have horrible APR's, low limits, and I don't plan on ever using them again.

 

I have heard that you never want to close a line of credit as it is bad for your credit / score, but I have also heard that the average age of your line of credit (when it was opened) is a factor as well. I am now thinking it may benefit me to close my 6 month old Target card etc. to increase my average age of card's life.

 

Thoughts / advice?

 

I probably should have mentioned that if you go to the annualcreditreport.com site, order them via mail. The online versions do not contain as much information.

[hkbushido]

All good points so far. I'd like to add another scenario where you would want to close cards.

 

When I was rebuilding credit I started with 2 $300 cards, then the 3rd card I got was about 1.5 years later. I no longer have those first two cards as I have closed them knowing very well they were my oldest TL's. Why? because I had obtained higher limit cards and didn't want new creditors to continue to give me low limit cards. This is referred to toy card hell, where everyone keeps giving you low limit cards because that's all one applies for and gets stuck in the level.

 

My lowest limit card now is $6k which again is my oldest TL and once again I'm thinking about closing it as the next lowest card I have is at $15k limit. So even though in 10 years these couple of cards will fall off my record and my AAA will drop a bit, it won't have that much effect as by then I'd have plenty of other credit.

 

This might now pertain to you specifically, I'm just sharing so maybe someone else can benefit

[hegemony]

I believe that when you apply for a loan, having too much credit at your current disposal can work against you. You may want to look into that- it would be a reason to close your more current ones. Plus, there is the risk factor. If these are cards with terrible conditions, the small hit you may take closing them is probably worth the benefit of not risking getting caught in their terrible interest traps. I think I read the ideal number to have open is 2 or 4, so you have more than you need.

 

But then, I'm a credit card hater, so my advice may be biased.

 

I have never had a mortgage, auto or other lender say a word about having over 500K in available credit.

 

why are you a credit card hater?

[kayvebear]

Here are my current balances / limits.  They are in order by APR (USAA being highest, Chase #2 being the worst. I do not to increase my credit limits in the future, and don't want to get negatively categorized like the above poster mentioned as someone only deserving small lines. Should I consider then closing all my small lines of credit in attempt at getting larger lines in the future?

 

USAA $5,929.00 / $6,000

CAPITAL ONE $710.10 / $750

CHASE #1 $1,399.00 / $1,500

BOFA $428 / $500

MACYS $438 / $500

TARGET $0 / $300

PAYPAL $188 / $1,400

CHASE #2 $0.00 / $500

[virtualtreasure]

Here are my current balances / limits.  They are in order by APR (USAA being highest, Chase #2 being the worst. I do not to increase my credit limits in the future, and don't want to get negatively categorized like the above poster mentioned as someone only deserving small lines. Should I consider then closing all my small lines of credit in attempt at getting larger lines in the future?

 

USAA $5,929.00 / $6,000

CAPITAL ONE $710.10 / $750

CHASE #1 $1,399.00 / $1,500

BOFA $428 / $500

MACYS $438 / $500

TARGET $0 / $300

PAYPAL $188 / $1,400

CHASE #2 $0.00 / $500

 

 

Right now the chief concern is paying down high/maxxed out balances and/or reducing APRs, NOT closing accounts, which should not be a concern until balances are zeroed out...granted reductions may be difficult to come by with the current balances reporting but closing accts with high inividual and overall util will only take your score for a nose dive and potentially further alarm creditors

[kayvebear]

You can get creditors to reduce your APR once account is already up and running? Is it similar to asking for a credit line increase?

[dgates01]

Here are my current balances / limits.  They are in order by APR (USAA being highest, Chase #2 being the worst. I do not to increase my credit limits in the future, and don't want to get negatively categorized like the above poster mentioned as someone only deserving small lines. Should I consider then closing all my small lines of credit in attempt at getting larger lines in the future?

 

USAA $5,929.00 / $6,000

CAPITAL ONE $710.10 / $750

CHASE #1 $1,399.00 / $1,500

BOFA $428 / $500

MACYS $438 / $500

TARGET $0 / $300

PAYPAL $188 / $1,400

CHASE #2 $0.00 / $500

 

You're card utilization would probably merit an F over at Credit Karma.

[kayvebear]

Here are my current balances / limits.  They are in order by APR (USAA being highest, Chase #2 being the worst. I do not to increase my credit limits in the future, and don't want to get negatively categorized like the above poster mentioned as someone only deserving small lines. Should I consider then closing all my small lines of credit in attempt at getting larger lines in the future?

 

USAA $5,929.00 / $6,000

CAPITAL ONE $710.10 / $750

CHASE #1 $1,399.00 / $1,500

BOFA $428 / $500

MACYS $438 / $500

TARGET $0 / $300

PAYPAL $188 / $1,400

CHASE #2 $0.00 / $500

 

You're card utilization would probably merit an F over at Credit Karma.

 

 

Well, I am working on it. Paid off paypal in full yesterday, and will be paying Macy's and BOFA off in full this month too. Then I am down to 3 cards, though unfortunately they are the largest. It is going t take me some time.

 

 

[The Livid One]

Here are my current balances / limits.  They are in order by APR (USAA being highest, Chase #2 being the worst. I do not to increase my credit limits in the future, and don't want to get negatively categorized like the above poster mentioned as someone only deserving small lines. Should I consider then closing all my small lines of credit in attempt at getting larger lines in the future?

 

USAA $5,929.00 / $6,000

CAPITAL ONE $710.10 / $750

CHASE #1 $1,399.00 / $1,500

BOFA $428 / $500

MACYS $438 / $500

TARGET $0 / $300

PAYPAL $188 / $1,400

CHASE #2 $0.00 / $500

 

You're card utilization would probably merit an F over at Credit Karma.

 

 

Well, I am working on it. Paid off paypal in full yesterday, and will be paying Macy's and BOFA off in full this month too. Then I am down to 3 cards, though unfortunately they are the largest. It is going t take me some time.

 

Kudos to you for lowering your balances..!!

 

In the future remember to never get your balances so close to your limits.

 

You lucky that all of your accounts weren't closed by the creditors themselves rather than you having any choice in the matter.

 

Many others have had the above adverse action AKA---->AA, taken against then when in situations similar to yours.

[hbomb174]

Here are my current balances / limits.  They are in order by APR (USAA being highest, Chase #2 being the worst. I do not to increase my credit limits in the future, and don't want to get negatively categorized like the above poster mentioned as someone only deserving small lines. Should I consider then closing all my small lines of credit in attempt at getting larger lines in the future?

 

USAA $5,929.00 / $6,000

CAPITAL ONE $710.10 / $750

CHASE #1 $1,399.00 / $1,500

BOFA $428 / $500

MACYS $438 / $500

TARGET $0 / $300

PAYPAL $188 / $1,400

CHASE #2 $0.00 / $500

 

You're card utilization would probably merit an F over at Credit Karma.

 

 

Well, I am working on it. Paid off paypal in full yesterday, and will be paying Macy's and BOFA off in full this month too. Then I am down to 3 cards, though unfortunately they are the largest. It is going t take me some time.

 

You are doing so well!!!

Keep paying off as much as you can towards the smallest remaining balance, Cap1-> Chase #1 -> USAA?

Do not close any of the cards after you pay them off. Once you pay off all your cards you can ask chase for a Credit Limit Increase.

 

Also, do your best not to max out cards again in the future. Credit cards are a tool to paying for objects that you normally would have paid in cash anyway. They are not a license to borrow/go in debt.

If you don't have the cash, don't buy it.

If you follow these simple guidelines, I assure you you will always be on the good side of credit.

[kayvebear]

So you are saying I should pay off Capital One before Chase even though my chase APR is almost double?

[Roland99]

So you are saying I should pay off Capital One before Chase even though my chase APR is almost double?

 

Depends...for short-term, that could help your FICO but that USAA card being maxed (and Chase) is killing ya. You could consider getting into a CU and getting a good limit card w/a low or no interest BT option to help util out greatly but that might be an issue given your current situation.

 

Work on paying down the balances. Get overall util below 30% and no card over 50% (and more than half showing a $0 balance) and then work on getting some CLIs for various cards (or getting some newer ones with much better CLs and close 1 or 2 of the older ones that you don't use)

[Nelly16]

So you are saying I should pay off Capital One before Chase even though my chase APR is almost double?

 

Depends...for short-term, that could help your FICO but that USAA card being maxed (and Chase) is killing ya. You could consider getting into a CU and getting a good limit card w/a low or no interest BT option to help util out greatly but that might be an issue given your current situation.

 

Work on paying down the balances. Get overall util below 30% and no card over 50% (and more than half showing a $0 balance) and then work on getting some CLIs for various cards (or getting some newer ones with much better CLs and close 1 or 2 of the older ones that you don't use)

 

Go for the cards with the highest APR. Unless you have some immediate need for a higher FICO (apping for something) then it is smartest to pay off the cards with the highest APR (and thus save more money in the long run). Plus, in all honesty, with the high util you currently have, you probably shouldn't be apping for anything right now anyway. You'll be in the best app position if you wait until you get your util to at least below 30%.

[kayvebear]

So you are saying I should pay off Capital One before Chase even though my chase APR is almost double?

 

Depends...for short-term, that could help your FICO but that USAA card being maxed (and Chase) is killing ya. You could consider getting into a CU and getting a good limit card w/a low or no interest BT option to help util out greatly but that might be an issue given your current situation.

 

Work on paying down the balances. Get overall util below 30% and no card over 50% (and more than half showing a $0 balance) and then work on getting some CLIs for various cards (or getting some newer ones with much better CLs and close 1 or 2 of the older ones that you don't use)

 

Go for the cards with the highest APR. Unless you have some immediate need for a higher FICO (apping for something) then it is smartest to pay off the cards with the highest APR (and thus save more money in the long run). Plus, in all honesty, with the high util you currently have, you probably shouldn't be apping for anything right now anyway. You'll be in the best app position if you wait until you get your util to at least below 30%.

 

Yeah that is what I have been doing since the get go when I decided to get debt free. Right now its about saving money ... and I know my FICO will improve immensely as a result of making the right decisions. By 2014 all BADDIES should be erased from my report... (2005-2007 were rough years).

 

 

 

[BW1216]

Can't believe it hasn't been said, but don't close those little cards once you pay them off. If you close them your balance to open credit limit (AKA Utilization) is going to go up, which will hurt your score even more at this point. Here's a scenario:

 

USAA $5,929 / $6,000

CAPITAL ONE $710 / $750

CHASE #1 $1,399 / $1,500

BOFA $0 / $500

MACYS $0 / $500

TARGET $0 / $300

PAYPAL $0 / $1,400

CHASE #2 $0.00 / $500

$8038 outstanding debt/$11450 credit line max = 70.20% utilization

 

 

USAA $5,929 / $6,000

CAPITAL ONE $710 / $750

CHASE #1 $1,399 / $1,500

BOFA $0 / $500

MACYS $0 / $500

TARGET $0 / $300

PAYPAL $0 / $1,400

CHASE #2 $0.00 / $500

$8038 outstanding debt/$8250 credit line max = 97.43% utilization

I hope that you see those small limit cards are helping you until you take big chunks out of your bigger debts.

Edited May 6, 2011 by BW1216

[kayvebear]

Can't believe it hasn't been said, but don't close those little cards once you pay them off. If you close them your balance to open credit limit (AKA Utilization) is going to go up, which will hurt your score even more at this point. Here's a scenario:

 

USAA $5,929 / $6,000

CAPITAL ONE $710 / $750

CHASE #1 $1,399 / $1,500

BOFA $0 / $500

MACYS $0 / $500

TARGET $0 / $300

PAYPAL $0 / $1,400

CHASE #2 $0.00 / $500

 

$8038 outstanding debt/$11450 credit line max = 70.20% utilization

Wow. Thank you. Crystal clear from your help.

 

 

USAA $5,929 / $6,000

CAPITAL ONE $710 / $750

CHASE #1 $1,399 / $1,500

BOFA $0 / $500

MACYS $0 / $500

TARGET $0 / $300

PAYPAL $0 / $1,400

CHASE #2 $0.00 / $500

 

$8038 outstanding debt/$8250 credit line max = 97.43% utilization

 

I hope that you see those small limit cards are helping you until you take big chunks out of your bigger debts.