Credit Cards

[ashber]

Okay, I have been paying off my debt, and will be done in less than a year. I have a total of 12 credit cards =O with a mix of charge and credit cards. Okay, so I want to cancel all my cards once my debt is all paid off. But, I know I can't because in a couple years I am getting married and we will be buying a house. I know we are suppose to keep the oldest, but the oldest 3 are from retail stores, and the closest bank visa card is 8 months after that. Should I close those retail accounts? I really just want to pay all cash for everything, but I want something for emergencies, or if I need to book a hotel or rent a car. Is it okay to just have one card, or is it recommended to have 2-3 cards?

[haulingthescoreup]

It is very much recommended that you have 3-5 cards. The scoring formula reflects this, and common sense does as well. With all the conniption fits that banks are going through, it's very wise to have several cards, all from different lenders.

Your ultimate goal should probably be 3 bank cards (with Visa, MC, American Express, or Discover logos on them) and 2 store and/or gas cards (store/ oil company logo only.)

Before you start closing stuff, you might want to project out 10 years ahead, and figure out what would happen to your AAoA (average age of accounts) if you suddenly had a big chunk of your credit history missing. (Closed cards are supposed to report for 10 years, and then they fall off, never to return.) Many of us are looking at big donut holes in our history as old, closed accounts prepare to fall off, and then our AAoA drops as well as in some cases our total history. For example, as your oldest cards are retail cards, consider that store chains get bought or go out of business all the time, and if no one else picks up their CC business, you have a card that is guarantee to vanish from your history. Ask those who had a Mervyn's card.

May I ask why you want to close them? You know that as long as they are never late, they're helping your overall credit profile and your FICO scores every month by adding clean history, right? Around here, we "sockdrawer" cards we don't want to use very much, just pulling them out often enough to buy a Slurpee, put the card back, and then pay it off. Your call, of course.

I think that in your position, I would identify the cards that I was willing to let go of, and plan to close one every year, starting with the youngest. That will help avoid a sudden drastic change in history hitting 10 years from now, when you might be applying for a mortgage for your next house after the first one.

[Uborrow-Upay]

ashber, welcome to the forum!

HTSU is right on the money, as usual. I'd like to add another perspective to all this.

I don't want to be a downer, but should a divorce occur, or should your spouse pass away, you definitely DO NOT want to be left without any credit in your own name! You've got to keep some good credit history for yourself, no matter what...and I mean, JUST yourself alone on that credit.

Should the unexpected actually happen, then at least your financial life won't be as stressful, and you'll have some options.

Just my 2 cents worth.

Edited for typo... 

Message Edited by Uborrow-Upay on 03-27-2009 07:43 AM

[txjohn]

Do not cancel all of your cards, especially your oldes.  If you had 12 cards all with high AF's, then you decide where to prune.

But just because you have credit does not prevent you from using cash from now on.  If you are a bit of a credit addict and tend to spend where you shouldn't, then DO NOT carry the cards with you.  Put them in a shoe box in the closet, in your safe, in your sock drawer. 

You do need to exercise them every couple months.  My opinion:  put your phone, internet, cable on auto draft across a few of them and just PIF each month like they were debit cards.

Buy something occassionally on the store cards.  Wait till the "after Christmas" or liquidation sales so that you can buy actual values.  Usually you can buy online so that you don't even have to go to the store.  Store cards do not have to be used nearly as often as the majors to keep healthy.

You are correct that you will need established credit when you buy a home.  So, if you choose to prune back a couple cards, try not to do so with the oldest 1 or 2.  The more "old" accounts you have, the less impact that new loans or accounts down the road will affect your AAoA.  You want to maintain an AAoA of at least 6 years if possible.  And when you get married, you will get a home mortgage, probably a car loan, etc. 

Don't be afraid of credit, just use it wisely, use it as a debit card and convenience card and credit reference.

[marty56]

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Uborrow-Upay wrote:

I don't want to be a downer, but should a divorce occur, or should your spouse pass away, you definitely DO NOT want to be left without any credit in your own name!

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I also agree 100%.  DW has her own credit in case something happens to me.