topic Re: Closing cards... good or bad in Understanding FICO® Scoring

Closing cards... good or bad

Anonymous — Wed, 08 Mar 2017 19:11:47 GMT

I have a few retail cards that I don't ever plan on using again mainly bc my major cards offer more benefits

they're all between 1 and 3 yrs old. total CL $3000. Aside small uptick in total utilization (would still be below 20%), are there any negatives to closing them? Would it hurt my fico?

they're all with Synchrony by the way.

Re: Closing cards... good or bad

Anonymous — Wed, 08 Mar 2017 19:39:39 GMT

IMO

Only things that could harm would be:

Any open balances not paid in full prior to closure.
Severe drop in overall Utilization.
Any autopay accounts tied to the credit card (most likely not unless branded with major network MC/Visa/AX)

The card remains on report for 10 years then will disappear, possibly lowering the overall age of credit history. This is why some keep a card open for 20 years or more.

Otherwise, it's your credit. It's your finances. YOU do what's best for you!

Re: Closing cards... good or bad

Anonymous — Wed, 08 Mar 2017 19:40:16 GMT

No downside to closing them. Closed accounts will remain on your credit report for 10 years and the age of them will continue to be included in your average age of accounts.

If you don't use cards, there's no use in having them. Also, since they're all with Synchrony, I'm assuming they are all store cards which IMO can be viewed as a less than favorable "look" when you're applying for prime cards or loans. Closing them down, IMO, can only be a positive move.

Re: Closing cards... good or bad

Anonymous — Wed, 08 Mar 2017 19:42:03 GMT

Aside from the issue of total U, there is no downside to closing crummy store cards that (a) you never use and (b) are not your oldest cards. (If the card was your oldest card there might be a case for keeping it open.) Closing them will have no affect on your AAoA.

Indeed, the very presence of store cards on your report is looked at negatively by the insurance industry, so you are making a good decision.

Re: Closing cards... good or bad

Anonymous — Wed, 08 Mar 2017 20:00:19 GMT

@Anonymous wrote:
Aside from the issue of total U, there is no downside to closing crummy store cards that (a) you never use and (b) are not your oldest cards. (If the card was your oldest card there might be a case for keeping it open.) Closing them will have no affect on your AAoA.

Indeed, the very presence of store cards on your report is looked at negatively by the insurance industry, so you are making a good decision.

Why are store cards viewed negatively by the insurance industry? Also, is that referring to the insurance industry as a whole, or a certain subdivision (health/home/auto)? What difference would it make to an insurance company whether the cards are store or major network? (genuine questions, not trying to sound like a smart-allec)

Re: Closing cards... good or bad

Anonymous — Wed, 08 Mar 2017 20:34:41 GMT

@Anonymous wrote:
Why are store cards viewed negatively by the insurance industry? Also, is that referring to the insurance industry as a whole, or a certain subdivision (health/home/auto)? What difference would it make to an insurance company whether the cards are store or major network? (genuine questions, not trying to sound like a smart-allec)

The short answer is simple: because the statisticians who work for the insurance industry have demonstrated (to their internal satisfaction) that an insurance company tends to lose money when an insured person has store cards. It could be that people with store cards get in more auto wrecks,or that they are more likely to be at fault or that they are more likely to file claims in general or that the claims are more expensive. Could be something else I have missed.

To find out the details you'd have to talk to one of their statisticians. I am not sure they have published the exact nature of the additional cost burden that such customers entail to the insurance company. But apparently it is real.

I think store cards are looked at as a problem for both auto and home. Contributor Thomas Thumb knows quite a bit about this.

There are other surprising ways that the insurance industry looks at your credit reports, things that you wouldn't guess at first. For example, they ding you if your oldest account is an installment loan, rather than a credit card. They also dislike it if you have credit accounts with auto stores, like Pep Boys or Autozone.

Re: Closing cards... good or bad

Anonymous — Wed, 08 Mar 2017 21:17:00 GMT

Interesting about the auto store accounts CGID, I was not aware of this. Very informative as always.