How much credit is too much? Should I close some cards?

[Klineact]

I finally am at the point where I have all the credit I could ever need or want. I have open lines of $200K give or take a few thousand.  All  have zero balances except 2 presently (a lot of them are store cards, Kohls, VS, Ikea, Pep Boys, Wayfair, etc.)  I have a bunch of nice limit visa/mc/discover. with 5 figure limits. I use my Penfed Navy and USAA cards bc they are limits from $17.5 to $26K  I dont want to lose those types of cards. I have barely any debt I owe maybe 3 grand in CC bills which I could pay off today but when I pay off all my cards my score drops for some reason and they are all at 0% so I have just left then alone and slowly pay them down. 

I have gotten big increases on a bunch of cards lately and I am just wondering if I should close some like store cards I rarely use and this bucketed savor one card I have that started out as a $1000 cap one platinum, is my oldest card which is about 7 years and in that time despite my high scores in the high 700's  now, I have gotten only one $100 CLI in all that time. Ive only kept it open bc its my oldest card. Can I close it? I dont use it bc of the limit ever.

What if anything else should I close? Should I leave all these cards open even if I rarely use them? Besides this small amount of cc debt I have a 10K personal loan and  a mortgage. I have no  other debt, no car payments or student loans so I am in a good place debt wise.I have 6 cards with synchrony alone (Pep Boys, Amazon, Carecredit, Lowes, Zulily (which I think they are closing?) and LL Flooring) I do use all of these Synchrony cards on various occasions with the exception of the Zulily card.  The only ones I really care about tho are Carecredit and Amazon and Lowes. The other 3 I could live without.  I worry about carrying so many high limit open cards and may want to move in the next 6 months or so and I will need another mortgage when I sell my current house.  In anticipation of this, should I start closing cards to not look risky to lenders? 

[Thomas_Thumb]

Getting a mortgage loan is not limited by you aggregate CL on revolving accounts. Credit limits are not used for DTI calculations for loan amounts. So no need to close anything to reduce CLs for that reason.

Close cards if you want to reduce complexity or exposure. I am down to 5 cards, 6 counting an AU card. I kept my oldest card , a 1984 AMEX, although it gets limited use and has a $55 annual fee.

I find it helpful to have total CL high enough to keep aggregate utilization under 5% based on normal monthly spend.  I don't see any Fico score penalty until aggregate utilization exceeds 9%. I just pay statement balances - no early pay. So, having an AG CL of 20x average spend avoids dips in Fico score. 

Aside from CL, age of oldest account and average age of accounts are important for Fico scoring purposes. So, it is best to keep your oldest account and/or next oldest open. Sure, closed accounts still count but, some day they will drop off your file. Don't believe the 10 year rule, they can be removed many years earlier at the discretion of the issuer. I had one removed after 6 years.

[Horseshoez]

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@Klineact wrote:

...I have barely any debt I owe maybe 3 grand in CC bills which I could pay off today but when I pay off all my cards my score drops for some reason and they are all at 0% so I have just left then alone and slowly pay them down...

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One additional point, if you pay all your cards down to zero except for leaving a trivial balance on one or two, your scores will not drop.  This is called AZEO; some folks practice it by leaving $5.00 on one card, others, myself included simply pay all cards off prior to the statement cut date and rely on a few latent charges to post prior to the statement date.

[Klineact]

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@Horseshoez wrote:

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@Klineact wrote:

...I have barely any debt I owe maybe 3 grand in CC bills which I could pay off today but when I pay off all my cards my score drops for some reason and they are all at 0% so I have just left then alone and slowly pay them down...

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One additional point, if you pay all your cards down to zero except for leaving a trivial balance on one or two, your scores will not drop.  This is called AZEO; some folks practice it by leaving $5.00 on one card, others, myself included simply pay all cards off prior to the statement cut date and rely on a few latent charges to post prior to the statement date.

Oh ok good to know about the trivial balance. I will pay them off and leave a small amount and see how that goes. what is AZEO?

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[Thomas_Thumb]

AZEO = All Zero Except One

The actual Fico score penalty you are experiencing is due to "no recent revolving account activity".  Fico, incorrectly, evaluates whether or not a revolving account has activity based on its reported balance. If the account reports $0 Fico considers it inactive.

To avoid the typical 15-20 point penalty, one or more revolving accounts must report a balance in a given month. AMEX charge cards (green/gold/platinum/black) are open accounts with 1 month terms. They are not classified as revolving accounts. Therefore, if it were the only account with a balance, the no recent revolving account activity would be applied.

[Klineact]

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@Thomas_Thumb wrote:

AZEO = All Zero Except One

The actual Fico score penalty you are experiencing is due to "no recent revolving account activity".  Fico, incorrectly, evaluates whether or not a revolving account has activity based on its reported balance. If the account reports $0 Fico considers it inactive.

To avoid the typical 15-20 point penalty, one or more revolving accounts must report a balance in a given month. AMEX charge cards (green/gold/platinum/black) are open accounts with 1 month terms. They are not classified as revolving accounts. Therefore, if it were the only account with a balance, the no recent revolving account activity would be applied.

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Thanks for the explanation! Much appreciated. 

[markbeiser]

The only reason I can think of to close old cards, other than the feels or less to keep track of, is if the average limit of all your cards is below, $9000, and you live in a state where insurance companies can use credit history as a factor in determining rates.
I've no idea how much of a difference it makes, or even why it is used in insurance scores, but one of the scoring factors is the average credit limit on bank credit cards, with the maximum benefit being an average of $9000 or higher.

I had already closed any cards that didn't have the potential to break a $10k limit very soon before I learned about that tidbit.

[SouthJamaica]

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@Klineact wrote:

I finally am at the point where I have all the credit I could ever need or want. I have open lines of $200K give or take a few thousand.  All  have zero balances except 2 presently (a lot of them are store cards, Kohls, VS, Ikea, Pep Boys, Wayfair, etc.)  I have a bunch of nice limit visa/mc/discover. with 5 figure limits. I use my Penfed Navy and USAA cards bc they are limits from $17.5 to $26K  I dont want to lose those types of cards. I have barely any debt I owe maybe 3 grand in CC bills which I could pay off today but when I pay off all my cards my score drops for some reason and they are all at 0% so I have just left then alone and slowly pay them down. 

I have gotten big increases on a bunch of cards lately and I am just wondering if I should close some like store cards I rarely use and this bucketed savor one card I have that started out as a $1000 cap one platinum, is my oldest card which is about 7 years and in that time despite my high scores in the high 700's  now, I have gotten only one $100 CLI in all that time. Ive only kept it open bc its my oldest card. Can I close it? I dont use it bc of the limit ever.

What if anything else should I close? Should I leave all these cards open even if I rarely use them? Besides this small amount of cc debt I have a 10K personal loan and  a mortgage. I have no  other debt, no car payments or student loans so I am in a good place debt wise.I have 6 cards with synchrony alone (Pep Boys, Amazon, Carecredit, Lowes, Zulily (which I think they are closing?) and LL Flooring) I do use all of these Synchrony cards on various occasions with the exception of the Zulily card.  The only ones I really care about tho are Carecredit and Amazon and Lowes. The other 3 I could live without.  I worry about carrying so many high limit open cards and may want to move in the next 6 months or so and I will need another mortgage when I sell my current house.  In anticipation of this, should I start closing cards to not look risky to lenders? 

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No you will gain nothing by closing cards.  Better to leave them alone.

As to the credit scoring when you pay things off, you only need to let one bank card report a balance to avoid being penalized.