What is the correct way to close accounts?

[Anonymous]

I have 6 bank credit cards (all visa or mastercard)and I have 4 store credit cards.

I would like to get to the point where I only have...

1 Visa
1 MasterCard
1 American Express or Discover
2 Store cards

I understand that closing accounts can have a negative affect on your FICO score but is there a way to minimize this?

Could you close out one card every 3 months or so and not have your score drop?

Thank you

[Anonymous]

Closing cards can hurt you for a couple of reasons: 1) It will decrease your amount of available credit which can affect your credit utilization(i.e. the ratio of what you owe to the amount of available credit), and 2) it can hurt the average age of your accounts.

You can counteract the utilization concerns by carrying a lower balance, in proportion with your new total available credit. You can't do anything about losing the age associated with the closed account. Closing cards all at once or over a period of time won't have any impact on the above issues.

Now, none of this is to say that you shouldn't close cards that have horrible terms -- high annual fees, high interest rates, etc. Just be aware of what you'll gain and lose from doing so, and make your choices accordingly.

[Anonymous]

This is a lesson I learned the hard way.  Closing accounts KILLS your UTIL and eventually when they fall off could hurt your age. 

Why do you want to close them? 

If it were me now, I'd leave them open as sock drawered and use in a rotation/PIF unless there is a compelling reason to close them.

Message Edited by ct99 on 04-23-2008 08:35 AM

[Anonymous]

---

meadmaker wrote:
2) it can hurt the average age of your accounts.

You can't do anything about losing the age associated with the closed account.

---

Just to be clear, closed positive accounts stay on your reports for ten years after they are closed, during which time they continue to count towards average age.

Strictly speaking, meadmaker's comments are correct, but keep in mind that the average age of your accounts will NOT be hurt right away when you close an account.  It MAY be hurt when the account falls off ten years from now, and even then it will only hurt if the account's age is greater than your average age at that time.

[Anonymous]

For additional info read this thread:

http://ficoforums.myfico.com/fico/board/message?board.id=ficoscoring&thread.id=4402