Cancelling Credit Cards

[Anonymous]

I heard that it was better to cancel smaller credit cards to raise your score, now I read on this website that's not so. I only cancelled them a couple weeks ago and haven't received the confirmation letter yet, is it too late to reactivate? Would reactivating them be a negative on my score too?

[Boswd]

In the short term yes cancelling credit cards will do some harm to your score.   But it also depends on your financial situation >   If you had too many cards, then yes, in the long run cancelling these cards will do you very good in the eyes of potential lenders.    You don't want to seemed stretched and carry on too much debt.

Now if you still have one or two cards the best thing to do get the balance due to limit ratio under 30% on these pay on time every month and that small hit you took will be a thing of the past.

Not too mention you are getting rid of potential debt, which should be your main concern,  being out of debt  not your Fico number.   Your Fico number will take care of itself as long as you take care of your debt.

[Anonymous]

The best thing to do with smaller cards is to be faithful in payments, keep utilization very low (but don't sockdrawer your card; the CC cos like to see some activity), and grow them into large cards. It's like raising crops. It does take patience, but CLIs do happen, especially once your FICO gets to the mid-600s and baddies recede into the past. As your time with a particular company grows, your record with that company becomes more important, and the company is usually more willing to overlook last year's and the year before's baddies.

The only time I would recommend canceling a card is if they have onerous fees and simply refuse to reduce them. By the time your FICOs hit 650 to 670, most card issuers realize you don't have to put up with unreasonable annual fees, and will improve your deal rather than lose you as a customer.

[Boswd]

The other time when you should cancell some cards is when you have TOO MANY cards.  I think anything over three cards, you are not only putting yourself in financial risk but   Potential lenders look at that as a potential RED FLAG that this person could get into some serious financial problems quickly.

If you have, let's say   6 cc each, for easy math sake, with a $10,000 limit on each.    Future lenders can look at that as a possible $60,0000 potential debt.  Not good

Don't let anyone tell you that having alot of cards is good for your score,  it's not.    Your only obligation should be your financial welfare to yourself and your family not the ALMIGHT FICO score.

If you have alot of cards close some the newers ones and keep your older ones.    I personally recommend anyone who is kinda of struggling but not there yet,   to have no more than two cards.   That's all you need to keep a nice credit history going.   Too many cards = Too much debt.

[Anonymous]

Overall, having and faithfully and conservatively using CCs is good for your credit rating. Like anything else, there does come a point of diminishing returns. Your fourth credit card doesn't raise your FICO as much as your third, your fifth card doesn't increase it as much as your fourth did, and so on. By the time you have seven or eight cards, you've hit an asymptote on the number of revolving charge accounts versus FICO chart, and the curve goes flat.

[Anonymous]

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@Boswd wrote:
I personally recommend anyone who is kinda of struggling but not there yet, to have no more than two cards. That's all you need to keep a nice credit history going. Too many cards = Too much debt.

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Only if you put significant balances on your cards.

Provided you have the discipline to not actually use the cards beyond putting just enough of a balance to get billed ($30 per card will suffice), one could make a cogent case that when you're starting out is the BEST time to get several credit cards. Your credit score is dinged and/or young anyway, so having a "younger" history won't bring your score down that much. And if you are diligent, make those payments on time, and keep bugging the CC companies for those CLIs once every nine months or so, five years down the road you can have four or five tradelines with good histories and respectable CLs in the $2000 to $5000 range, with your baddies several years back and about to fall off.