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Always Controvertial: to Close a Card, or not?

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Anonymous
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Always Controvertial: to Close a Card, or not?

Sorry in advance for the long post. I tried to anticipate possible questions. That combined with my natural tendency for wordiness can be quite dangerous! Smiley Wink

I know conventional wisdom is to not close an account in general, except for non-FICO reasons (or if specifically asked by a potential lender, such as a mortgage company). To a certain extent, I have non-FICO reasons (I want to reduce the number of accounts I manage and also reduce the number of accounts potentially susceptible to fraud, etc.), but it's not like they're costing me annual fees or anything.

I would also argue that I have FICO score reasons to close them. The FICO scores I've got over the past couple of years all say that I have too many accounts in general (see here). Now, I know that closing these accounts won't help my FICO score immediately, but the only way I know of to get rid of accounts is to close them and let them age and fall off of the report. Sure, it may take 10 years, but that's really the only option.

Anyway, I've got several candidates for closure. Two of them are store accounts (Radio Shack and Sears) that I haven't even used in the past 6-7 years. One hasn't even reported since Dec 2003 (last activity Sep 2001), the other has reported fairly recently (Feb 2008), but hasn't had activity since Jul 2003. Both of these accounts have "Account Status" as "Account is Inactive" on my report from myFICO, and both are about the same age, which is about equal to the average age of my accounts. If I can close these accounts without updating their activity dates, they should fall off much sooner than 10 years. Also, I'm concerned that the lenders may close the accounts due to inactivity, which may be perceived as negative. I really don't want to shop at these places just to use these cards to keep them active.

Another 2 candidates are regular credit cards that are significantly younger than my average age (both opened in Sep 2004). Besides being "young", these aren't great cards, and I have a 5 open accounts with BofA - which I don't particularly care for.

My goal is to have UTI basically down to zero in a few months (except for a small balance on a couple of cards to show active use of credit), so there really shouldn't be any UTI issues with closing these accounts.

I also have a joint account that I would like to close for liability reasons (I no longer want to be responsible for the credit of the other person on the account). This is marked with "!" below, as is the AU account which should be dropping off my report soon (I'm no longer an AU on the account).

Here's the whole she-bang so that you all can make well-informed comments ("good" status below is "Paid or paying as agreed", "NR" is "Not Reported", and "*" marks the accounts I'm considering closing):

Format is:
Account name - type - CL - open - status - last act - closed

!Care Credit - joint CC - $5000 - 7/04 - Open/Good - 2/08
*Sears - store - $3600 - 7/01 - Inact./Good - 7/03
BofA 1 - CC - $29200 - 5/95 - Open/Good - 3/08
Citi - CC - $11000 - 5/02 - Open/Good - 2/08
!WaMu - AU CC - $3500 - 4/07 - Open/Good - 2/08
Chase 1 - CC - $11200 - 10/03 - Open/Good - 2/08
*BofA 2 - CC - $11000 - 9/04 - Open/Good - 2/08
BofA 3 - CC - $20800 - 10/00 - Open/Good - 3/08
*BofA 4 - CC - $10600 - 9/04 - Open/Good - 1/08
BofA 5 - CC - $12100 - 7/01 - Open/Good - 9/06
Ntl Cty - CC - N/A - 3/99 - Closed/Good - 6/02 - 5/02
Discover - CC - N/A - 12/00 - Closed/Good - NR - 5/02
Chase 2 - CC - N/A - 5/00 - Closed/Good - 12/00 - 11/00
Chase 3 - CC - N/A - 11/94 - Closed/Good - 7/98 - 5/00
Network - LOC - N/A - 9/98 - Closed/Good - 2/00 - 2/00
*Radio Shack - store - $1500 - 4/01 - Inact./Good - 9/01
Barclays - CC - $16000 - 4/01 - Open/Good - 3/08
Ballys - install. - N/A - 9/00 - Closed/Good - 9/03 - 8/03
TMCC - Auto - N/A - 9/99 - Closed/Good - 12/99 - 12/99
AHFC - Auto - N/A - 4/02 - Closed/Good - 4/07 - 4/07
Chase - Auto - N/A - 11/01 - Closed/Good - 3/02 - 3/02


Any thought/comments?
Message 1 of 6
5 REPLIES 5
Anonymous
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Re: Always Controvertial: to Close a Card, or not?

Looks great!  I think you have a nice plan.  You've done a great job answering any possible objections that might come up, IMO.
 
Except for maybe one or two. Smiley Tongue
 
1)  It looks like you have a couple of installment loans that are going to fall off soon: one next year, and one in about four years.  When these fall off, your "too many accounts" factor will hurt less right away, even if you don't close any cards now.  I'm not saying you shouldn't close these cards, but keep in mind you'll be losing some other accounts from your reports even before the newly closed CCs fall off ten years from now.
 
2)  It looks like you won't have any store cards or gas cards left.  Remember that having just one of these contributes positively to your credit mix, which accounts for 10% of your score.
 
Neither of these objections are deal breakers, IMO, as long as you understand the ramifications.
 
Good luck!
 


Message Edited by cheddar on 04-15-2008 09:25 PM
Message 2 of 6
Anonymous
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Re: Always Controvertial: to Close a Card, or not?

Thanks for the thoughts Cheddar. As I was putting the list together, I did start to think about some of the already-closed (and terminated AU) accounts that might be falling off my report in the near future. Given that and the "mix" argument, I am starting to consider keeping the Sears card and closing only the Radio Shack. I just got a new Sears card in the mail, and it listed a lot of stores besides Sears at which it can be used (OSH, Kmart, landsend.com, to name a few).

Also, the Radio Shack and Sears cards are classified somewhat differently. Sears is "charge account" (classic "store" card classification, I believe), but Radio Shack is "Combined Credit Plan", whatever that means. Does that mean that both of these cards contribute to my "credit mix", or are the considered to be the same type as far as "mix" is concerned?

Thanks again,
Bob
Message 3 of 6
Anonymous
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Re: Always Controvertial: to Close a Card, or not?

What possible benefit would  you get from closing these old accounts?  Remember, old accounts, especially those 19+ years, are credit scoring gold!   I just ran my EX FICO, and I am at 689 9 months out of a bk.   Why?   Obviously, perfect payment history since then, but also importantly, I have a 20 year old Discover card that is reporting.  
 
I would not close ANYTHING that has no annual fee unless you can come up with a compelling reason to do so.  I cannot see any negative to leaving it on there as long as possible.
Message 4 of 6
Anonymous
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Re: Always Controvertial: to Close a Card, or not?

The answer always depends on your priorities.
 
Are you trying to optimize your FICO score? Probably best to keep them open.
 
Are you trying to minimize the risk of fraud?  Close 'em.
 
Do you have problems controlling your use of credit? Nuke 'em.
Message 5 of 6
Anonymous
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Re: Always Controvertial: to Close a Card, or not?

Boscoe, see my original post. I clearly listed the reasons for wanting to close these accounts, and the benefits as I see them. FICO is telling me I have too many accounts in one of my top 3 "what's hurting your score" analysis, that's probably the biggest reason.

FICO aside, I don't like having a lot of accounts open that I don't need/use. One big reason is that those accounts are a target for fraud. It's also a hassle to have yet *another* address to update every time I move (which these days seems to happen every couple of years, for whatever reason). If I forget to update the account, the risk of fraud goes up if they mistakenly send a new card to an old address.

Finally, what happens if the lender decides to close it because I'm not using it? That would surely be more negative than if I closed the account myself. I'm not interested in shopping at Radio Shack every so often just to keep the account active.

They're not my oldest accounts. They're not 19+ years old. They're not even more than the average age on my accounts. I don't need the CL for UTI (for the BofA accounts, I may even be able to convince them to add the CL from the closed accounts to one of the older accounts I'm leaving open). Why shouldn't I? I'm not seeing a compelling argument.

If anyone can come up with a good argument against some of my rationale, or bring up new points I haven't considered (as Cheddar did), I'd love to hear it.
Message 6 of 6
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