Cancel secure card?

[Anonymous]

OK, here's another question for the expert. I have a secure credit card through USAA with a credit limit of $3000, which is backed by a $3000 CD that they have on hold. I have already reached the two-year minimum for keeping the money in a CD, and am allowed to cash it here and at any time. Of course, if I do so, the credit card will be canceled.

Here's my predicament. We are in the process of getting a VA loan, and I was hoping to use the $3000 as part of the cash that will be necessary to pay other costs associated with the mortgage. I'm wondering if I cancel the card, if it will show up as a negative mark on my credit report. Alternatively, I could always just charge $3000, but then it would show 100% utilization. I'm wondering which of these would be worse.

[Anonymous]

It won't show up as a "negative" - but your total credit available will go down $3000, which will hit your utilization and could definitely drop your credit score. 

[Anonymous]

I have 2 other capital one credit cards, one is $20,000 limit and the other is $7000. There is only $100 on 1 of the cards to maximize my score.

[Anonymous]

You should be fine then. Could ding you a couple points, but definitely better to close it rather than add $3000 in debt.

[Anonymous]

Here's the thing.  One of the factors in the mortgage scoring models is called Number of Accounts Showing A Balance.  FICO's mortgage models like it when most of your credit cards (but not all of them) are reporting a $0 balance.

Do you see how you can only do that with three cards?  If you have only two credit cards, then the best you can do is half of your cards reporting $0.  Half is not most.

So right now you are getting some scoring points for having most of your cards at $0.  When you go down to two cards you may lose some of those points.  If your mortgage scores are close to the border of what you need, then you are risking your scores going beneath that.

You'll have to balance that risk against your desire to have an additional $3000.

Predicting how much your scores might go down (as a result of this factor) is very hard to do.

[Glen_M]

---

@Anonymous wrote:
... I have a secure credit card through USAA with a credit limit of $3000, which is backed by a $3000 CD that they have on hold. I have already reached the two-year minimum for keeping the money in a CD, and am allowed to cash it here and at any time. Of course, if I do so, the credit card will be canceled....

---

Have they refused a product change to a non-secured card?  Two years ought to have ben more than enough time to build a relationsip that can get you a regular card, and get your security back.

[Anonymous]

USAA does not graduate cards.

[Anonymous]

CreditGuy: our scores are 670-700 and CalVet does not use scores to determine rate. They only need 620 to approve.

[Anonymous]

---

@Anonymous wrote:
CreditGuy: our scores are 670-700 and CalVet does not use scores to determine rate. They only need 620 to approve.

---

Then you are set.  Although it may affect your score, it is certainly not considered a negative or derogatory mark on your report, which I now see is what you asked about.  People close cards all the time -- it is absolutely not considered a negative mark.

For what it is worth, I would add to your own personal credit plan the goal of eventually acquiring a total of four cards.  Obviously not now, just at some point in the 2-3 years after the home purchase.