Credit Cards

[curlyheadedgirl]

Should you close open credit card accounts that are on your credit report, even if they don't have any balance on them?  Also, is it better to ask for a credit limit decrease on cards you know you will no longer use?  I am trying to clean up my credit score due to credit card issues.  Any tips/suggestions would be great

[VEEnVEGAS]

No, you do not want to close open accounts, especially not those with balances. CLD would lower your credit score also if you ever carry any kind of CC balance.

If you're concerned your cards might be closed for lack of activity why not just use them occaisionally for some small purchase?

[Lel]

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curlyheadedgirl wrote:

Should you close open credit card accounts that are on your credit report, even if they don't have any balance on them?  Also, is it better to ask for a credit limit decrease on cards you know you will no longer use?  I am trying to clean up my credit score due to credit card issues.  Any tips/suggestions would be great

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No and no, if you are interested in maintaining your FICO score.

Part of your FICO score is determined by the percentage of available credit that you use.  For example, if you have 4 credit cards with credit limits of $5000 each, and have a total of $1000 charged to these cards, you "utilization" of available credit will be 5%, which is a very good number in the FICO scoring system.  If you were to cancel 3 of the 4 cards, leaving you with just $5000 of available credit, your utilization would be 20%.  This will drop your score.

There's other factors at play as well.  FICO also looks at the average age of accounts (AAoA).  The longer your average age, the better - it shows that you have an established history of managing credit.  If you cancel a card, it will stay on your credit report for several more years, but eventually it will fall off, taking with it the accumulated history of credit.  Your AAoA would drop, which would also be a negative impact on your score.

For the same reason, it would be counterproductive to request credit limit decreases.  Leaving your cards unused, however, could lead to an involuntary CLD.

Here's a good resource:

Credit Scoring 101

[Itsmeagain]

Excellent analysis Lei . . . Kudos.

[Lel]

Can't take credit....I'm just repeating what others have taught me.

A more comprehensive analysis is here:

Closing Credit Cards

[rmaini]

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curlyheadedgirl wrote:

Should you close open credit card accounts that are on your credit report, even if they don't have any balance on them?  Also, is it better to ask for a credit limit decrease on cards you know you will no longer use?  I am trying to clean up my credit score due to credit card issues.  Any tips/suggestions would be great

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Should not close any credit card unless there is an annual fee attached. Having a zero balance on a credit card with any limit can help your score.

[Wolf3]

There are some cards out there with horrific terms and big fees (First Premeire heads the list).  Those should be closed unless that is all you can get (rarely the case).

[beamMEup]

I'll add that some prefer to keep their life simple by keeping a reasonable number of cards open.  Every card needs be babysat.  So don't feel pressured to keep more cards open than you want to actively monitor in some way.

DH likes five or six, I like three or four; and we were both fine with just one each.  Just watch that AAofA and utilization and do what works best for you.

[johnrieb]

So the credit cards I opened to rebuild my credit when my fico was around 600 (I have 3 that have $500 limits), I should hold onto now that I am at 731? Just making sure. Thanks!

[Wolf3]

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johnrieb wrote:

So the credit cards I opened to rebuild my credit when my fico was around 600 (I have 3 that have $500 limits), I should hold onto now that I am at 731? Just making sure. Thanks!

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Depends on how much they cost.  If the early cards have high annual or monthly fees, you probably want to close them after you have decent replacements.  Otherwise, better to let them sit.