topic Re: Any reason not to cancel? in Understanding FICO® Scoring

Any reason not to cancel?

Anonymous — Sat, 23 Jan 2021 16:07:17 GMT

With Alliant devaluing their points I am planning on dropping them, but before I do that I just want to make sure there's not a reason Im missing as far as my credit score goes to keep them.

I only have 3 cards:

1. CSR - 4 years

2. Capital One - 2yrs 2 mo

3. Alliant - 1yr 9 mo

Seems like closed accounts stay on your credit until they fall off (10 yrs?) so it doesn't appear it should matter and I plan on opening another account in it's place. Am I missing anything?

TIA!

Re: Any reason not to cancel?

thornback — Sat, 23 Jan 2021 16:31:50 GMT

Correct - closed accounts remain on your reports, generally, for ~10 years after the date of closure and will continue to age and factor into your age of accounts during that time. I'd probably replace it first then close - but that's just a personal choice.

The only thing lost by closing is the credit limit, so if loss of the limit will cause utilization to increase, then you may incur a point loss - which, of course, is reversible by paying down util. The other immediate thing to consider is the number of cards with a balance metric. No more than 1/3 of revolvers reporting a balance is ideal for scoring - so with 3 cards, you can fulfill that with AZEO (having two at $0 and one with a balance). If you close one, the lowest you can achieve is 1/2 of cards with a balance so you may see slight downward score movement (most likely on older scoring models like mortgages) til you return to having 3 open revolvers.

But other than that - if you don't want it, close it.

Re: Any reason not to cancel?

Anonymous — Sat, 23 Jan 2021 17:36:11 GMT

This is good info thanks, I don't carry balances besides what little amount the statement may close at. I think Ill just close it and I plan on opening another card.

Thanks for the help!

Re: Any reason not to cancel?

SouthJamaica — Sat, 23 Jan 2021 19:26:38 GMT

@Anonymous wrote:
With Alliant devaluing their points I am planning on dropping them, but before I do that I just want to make sure there's not a reason Im missing as far as my credit score goes to keep them.

I only have 3 cards:

1. CSR - 4 years
2. Capital One - 2yrs 2 mo
3. Alliant - 1yr 9 mo

Seems like closed accounts stay on your credit until they fall off (10 yrs?) so it doesn't appear it should matter and I plan on opening another account in it's place. Am I missing anything?

TIA!

I wouldn't close it. It's easier to optimize your scores with 3 revolvers than with 2.

Right now you can optimize your scores by letting Alliant or Capital One report a small balance and having CSR report at zero.

Once you're down to 2 cards, it's harder to target AZEO, especially since one of your remaining cards would be a Chase card.

Re: Any reason not to cancel?

Anonymous — Sun, 24 Jan 2021 04:23:41 GMT

3+ cards for scoring purposes IMO is overrated.

If you don't want the card feel free to close it. Will your scores be 10 points lower perhaps with AZEO with only 2 cards instead of 3? Maybe, maybe not. I personally wouldn't worry about the minor score shift unless your scores aren't top tier already. Completely your call though.

Re: Any reason not to cancel?

hdporter — Sun, 24 Jan 2021 06:44:27 GMT

My rule of thumb, for the last 20+ years has been, "Until such time as my average account age is at least 10 years, don't close a fee-free card".

FICO likes account age and anytime you're pricing out a mortgage loan, modest score increments can mean a difference of $1000's over the life of the loan. Good reason to do what you can to enhance account age.

Re: Any reason not to cancel?

Anonymous — Sun, 24 Jan 2021 17:38:20 GMT

The asterisk to what you stated above would be dependent on where one's current [mortgage] scores are.

If someone has high 700's mortgage scores for example, slight fluctuations won't matter at all in terms of dollars paid back over the life of the loan. If you're talking someone with mid-600's scores, you're absolutely right that a minor shift in points could matter significantly.

Re: Any reason not to cancel?

hdporter — Sun, 24 Jan 2021 18:24:13 GMT

@Anonymous wrote:
The asterisk to what you stated above would be dependent on where one's current [mortgage] scores are.

If someone has high 700's mortgage scores for example, slight fluctuations won't matter at all in terms of dollars paid back over the life of the loan. If you're talking someone with mid-600's scores, you're absolutely right that a minor shift in points could matter significantly.

I imagine I might agree with you under some circumstances. If, for example, my mortgage scores were consistently in the 800's, I wouldn't sweat my length of history quite so much.

However, whereas my FICO 8 scores have been consistently 800+ for over 4 years now, my FICO mortgage scores tend to run 720-760, with my middle score fallling short of qualifying for the best mortgage rates. For the last mortgage I took, I calculate a present value cost of $8000+ due to the modest score shortfall. Now, that's a potential savings for which I would take any number of modest precautions in order to recapture.

Generally speaking, I wouldn't be so quick (were I you) to dismiss what a year or two added years of average credit historyt might add up to financially.

Re: Any reason not to cancel?

Anonymous — Sun, 24 Jan 2021 21:20:30 GMT

I haven't dismissed anything at all. As I stated in my previous post, it's profile-dependent as to whether ot not it would matter. Using your profile it obviously would matter, so you're speaking from that angle, which I get. My point is that one can evaluate their own profile to determine whether it would matter for them. Also any age of accounts drops associated with a couple of card closures aren't likely to matter for a decade, so that really isn't a short term concern.