Closing Secured Cards? Good Idea Or Bad?

Anonymous · ‎04-19-2016

Hello all,

I have a quick question about closing some of my secured cards. I am working with a mortgage broker right now in the process of buying my first home. Over the last few years I have worked very hard to improve my credit. Some of the first cards I got at the time were secured cards. One with U.S. Bank and the other with Wells Fargo. These cards served their purpose in helping me build my credit. I now have other cards with much better rates and no annual fees. I know that closing accounts really hurts your AAoA but considering my AAoA is only 1yr8mo, would it really hurt that much? Also does closing accounts look bad or good to a mortgage lender? I would assume good because you have less overall exposure but I don't know.

Any help or advice would be great!

Anonymous · ‎04-19-2016

My advice for right now is do not touch your credit unless your broker tells you to do so. Any small movement in your file can change your mortgage score one way or the other. Just sit still until it's over.

After you secure the mortgage and close on your home, I would get rid of those secured cards. Your AAoA will not be impacted because the account will stay in your report for about 10 years.

Anonymous · ‎04-19-2016

@Anonymous wrote:
My advice for right now is do not touch your credit unless your broker tells you to do so. Any small movement in your file can change your mortgage score one way or the other. Just sit still until it's over.

After you secure the mortgage and close on your home, I would get rid of those secured cards. Your AAoA will not be impacted because the account will stay in your report for about 10 years.

All of this. Be patient, get that house, and then sort out the cards.

Anonymous · ‎04-19-2016

Awesome advice guys!

I kinda figured that would be the right way to go. I will just keep them how they are for now. Heck after I get a house, I can close them and buy me a nice house warming gift with the secured deposits I will get back

Anonymous · ‎04-19-2016

Don't close them. you can always try calling and seeing if they will graduate them early because youre trying to get a house. that might go in your favor as some cards report secured, and some not as secure even though they are. Just make sure they don't close it and reopen it like a Walmart upgraded card

Anonymous · ‎04-19-2016

As someone who just got their first mortgage, DO NOT CLOSE ANY CARDS! I simply removed my fiancee (Joint applicant) as an AU and her score tanked quite a bit. Luckily by the time it was time to lock in our rate her score had rebounded. The most important thing to do is pay down all of your balances, so your UTIL is low. Don't make any new inquiries, just sit in a corner and do nothing lol. But as soon as you close on that house, close the useless cards. I'm in the same boat as you with a very low AAoA. I closed a few cards, and plan on closing more in a few months. I'm working on having only a handful of cards that serve very specific purposes and have no overlap with other cards. I'll work on increasing limits on cards as well rather than having many low limit cards. The cards will stay reporting as positive and contribute to your AAoA for 10 years. Although it will show up as a closed account and your score will probably suffer a few points temporarily. Best of luck to you!

Anonymous · ‎04-19-2016

Good to know!! I am in the process of purchasing a home. We have our pre-approval and are currently looking. We had applied for a few cards in the last 2 months so I guess we need to go in the garden until we close on something.

takeshi74 · ‎04-19-2016

@Anonymous wrote:
I know that closing accounts really hurts your AAoA but considering my AAoA is only 1yr8mo, would it really hurt that much?

Read the Closing Credit Cards thread linked in the Helpful Threads sticky.

@Anonymous wrote:
Also does closing accounts look bad or good to a mortgage lender?

You'd need to ask your mortgage lender. Don't assume it's as simple and straightforward as closing being good or bad. It can be either depending on the specifics of your profile and the account(s) and what the creditor is looking for. As stated above, don't make any changes to your credit profile without discussing with your mortgage lender first.