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HiLine
Posts: 3,085
Registered: ‎10-19-2012
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Low - limit cards underrated?

[ Edited ]

I don't understand why some people want to close their low-limit cards. What's wrong with keeping cards that have a limit in the hundreds but no annual fee?

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Revelate
Posts: 9,640
Registered: ‎12-30-2011
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Re: Low - limit cards underrated?


HiLine wrote:

I don't understand why some people want to close their low-limit cards. What's wrong with keeping cards that have a limit in the hundreds?


Because many low-limit cards:

1) have a non-trivial AF

2) are no longer used anyway in favor of better cards that traditionally have better limits

 

There's nothing intrinsically bad with low limit cards, though if that's all one has, it can be more difficult to establish higher limit cards in excess of the "toy" limit strata by how ever one defines that.  End of the day, payment history is payment history, and payment history is king with regards to FICO.  That can be established just as well on a $300 limit as it can on a $30,000 limit.

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HiLine
Posts: 3,085
Registered: ‎10-19-2012
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Re: Low - limit cards underrated?

[ Edited ]

I edited the original post to include "no annual fee." Thanks for pointing that out. :smileyhappy:


Revelate wrote:

HiLine wrote:

I don't understand why some people want to close their low-limit cards. What's wrong with keeping cards that have a limit in the hundreds?


Because many low-limit cards:

1) have a non-trivial AF

2) are no longer used anyway in favor of better cards that traditionally have better limits

 

There's nothing intrinsically bad with low limit cards, though if that's all one has, it can be more difficult to establish higher limit cards in excess of the "toy" limit strata by how ever one defines that.  End of the day, payment history is payment history, and payment history is king with regards to FICO.  That can be established just as well on a $300 limit as it can on a $30,000 limit.


If you're not using the card any more, isn't it still worth keeping for the sake of AAoA? Most low-limit cards are obtained early in the credit building process, and therefore tend be the the oldest accounts as well. 

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Rhaeny
Posts: 1,507
Registered: ‎07-24-2011
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Re: Low - limit cards underrated?

I think that most people were closing out their accounts because of the AF, besides that I don't see any point in closing them because they will still be on your report.

 

As for the AAoA, it affects some people tremendously and others not so much.  If I closed out anyone of my low limit cards it wouldn't do any damage because I have TL's dating back 30 years.  On the other hand someone with a year or two will probably be dinged.


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toppers555
Posts: 551
Registered: ‎09-28-2012
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Re: Low - limit cards underrated?

Me personally I look at it as cleaning house. My credit has come a long way from where it use to be , and if new credit see the low limit account still being used I don't see any sense in them wanting to offer me higher limits then whatmy current creditors extend.



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beb86
Posts: 1,115
Registered: ‎10-31-2011
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Re: Low - limit cards underrated?


Rhaeny wrote:

I think that most people were closing out their accounts because of the AF, besides that I don't see any point in closing them because they will still be on your report.

 

As for the AAoA, it affects some people tremendously and others not so much.  If I closed out anyone of my low limit cards it wouldn't do any damage because I have TL's dating back 30 years.  On the other hand someone with a year or two will probably be dinged.


closing.credit cards wont affect your AAoA since a positive TL will continue to report for 10 years from the date closed

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drkaje
Posts: 3,491
Registered: ‎07-25-2008
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Re: Low - limit cards underrated?

I'm not rebuilding so a lower limit wouldn't really help short or long term goals. My long term (7 year) goal is to close all cards except 2 and use mostly cash.

 

Being really conservative about inquiries it really wouldn't make any sense or help my score to apply for another card, especially if the limit were low. Sure, it might help with utilization a bit but AAOA would also be affected.

 

In defense of lower limit cards... I probably managed spending a lot better with one $500 limit card, LOL!


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Valued Contributor
Rhaeny
Posts: 1,507
Registered: ‎07-24-2011
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Re: Low - limit cards underrated?


beb86 wrote:

Rhaeny wrote:

I think that most people were closing out their accounts because of the AF, besides that I don't see any point in closing them because they will still be on your report.

 

As for the AAoA, it affects some people tremendously and others not so much.  If I closed out anyone of my low limit cards it wouldn't do any damage because I have TL's dating back 30 years.  On the other hand someone with a year or two will probably be dinged.


closing.credit cards wont affect your AAoA since a positive TL will continue to report for 10 years from the date closed


Sorry, yep you are correct, I meant to say utilization and not AAoA, and that closing out your account can affect your utiilzation....duhhh.

 

Must of been up too late last night..LOL


Major CC's - Barclay's ($5.5K) | Barclay's Sallie Mae MC ($5K) | DCU ($7.5K) | Discover IT ($1.4K) | Genisys Visa ($1.4K) | NFCU Visa ($22K) | Navcheck ($15K) | Chase Freedom ($5K) | SDFCU Visa ($8K) | Amex BCP ($9.5K) | Amex Delta ($10K) |Store CC's| -Amazon ($4K) | Catherines ($850) | JCP ($4K) | Macy's ($1.7K) | Avenue ($850) | Victoria's Secret ($1.4K) | Walmart ($4.1K) | Paypal SC ($1.3K) | HSN ($2.5) | Sears ($2.6K) | Sams Club ($4.1K) |Goal|: Age with grace to 750 across the board |Last app|: 3/3/2014
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kevinjjc
Posts: 1,347
Registered: ‎01-14-2009
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Re: Low - limit cards underrated?

Higher limits beget higher limits, lower limits beget lower limits.

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kevinjjc
Posts: 1,347
Registered: ‎01-14-2009
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Re: Low - limit cards underrated?


beb86 wrote:

closing.credit cards wont affect your AAoA since a positive TL will continue to report for 10 years from the date closed


I agree, it won't affect your AAoA for 10 years while it continues to report.

 

I disagree, it will affect your AAoA once it stops reporting after 10 years.


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