Closing credit cards and credit score?

[tiffany24]

Hi all! Sorry if this isn't the right place but i've seen some interesting offers on credit cards and was wondering how closing the credit card before the annual rate kicks in will mess with my credit score? I currently have one main credit card i use and a couple of store credit cards i rarely use. I have an excellent (but young) credit score and don't want to ruin it. Thanks!!

[tonysemail]

i'd suggest trying a credit score simulator.
I don't know which one is best, but I favor using creditkarma.com to track my credit score.
It gives a rough approximation of what your credit score should look like and they have a simulator that let's you predict the impact of opening or closing new lines of credit.

[GizmoTX]

Try asking for the annual fee to be waived while being prepared to close the card if it isn't.
I had DS contact his cards with other banks to first raise his credit limit to maintain his utilization if he needed to close the fee card. He ended up getting higher limits plus the fee waived, but this depends on the bank & the card. Of course he pays his balance in full every month.

[Nickels Dimes Quarters]

RevDan at http://www.pointspreacher.com/ posts about flipping/churning credit cards for points and has tips for minimizing the risk to credit scores.

NDQ

[seattlecyclone]

By far the biggest factor in your credit score is whether you pay your bills on time. Keep a couple of no-annual-fee cards open for the long term to establish a long relationship with a particular company. Once you've done that, I don't think that closing newer cards will have much impact on your score. Again, regardless of all this you'll have a decent score as long as you keep paying your bills on time.

[forummm]

I generally don't sign up for cards with an annual fee. And if I were doing it to game the system by getting rewards, I would only pay the first annual fee because that was avoidable. I would then capture the rewards and close the card after about 6-9 months or whatever the period is. Closing cards that are newer accounts could actually increase your score, assuming 1) you don't carry balances on your other cards (which you shouldn't!), and you have older cards/credit accounts. Closing newer cards increases your average credit account age. I still have cards that I opened almost 20 years ago and I'll keep those for as long as I can.

[frugaliknowit]

It depends on the average age of your accounts and what your utilization percentage is.  For example, if your average age is 10 years and your utilization is close to zero, it makes virtually no difference (though having new accounts dings a bit...).

Keep in mind you really don't need your credit score much higher than 750 or so (the lowest mortgage rates are available at 740+, the best credit cards are a secret...).

[pdxvandal]

I've probably closed 5 or 6 cards in the past year -- and applied for 5 or 6 other ones -- and have seen very little change in my credit score (high 700s, low 800s).

[Axecleaver]

I think the big thing to avoid, is making sure to keep your oldest card open, forever. I made the mistake of closing my first card, which I got in college. It was about 25 years old. I lost a big chunk of my score (50-70 points?), because it changed my oldest card from "25 years" to "3 years." My score recovered eventually, but lesson learned. Closing cards that aren't your oldest doesn't seem to affect the score very much.

[Simply827]

I'm surprised there's so much misconception around this. Hang around the myFICO forums and you'll learn a lot. FICO accounts for all accounts, open and closed, so even if you close an account, it will still be scored the same way. I closed my oldest CC account because it had an annual fee, no rewards, and low limit. My score didn't change. Even more drastic, I closed out 13 of my oldest accounts (student loans) and my score remains the same. With that being said, if this card is a large amount of your credit limit, and you have reported balances on your other cards, your score will go down because of increased utilization.

[bacchi]

Right, even closed cards/accounts affect the Average Age of Account and stick around for 10 years.

[Axecleaver]

Credit karma shows a big red "poor" rating on my score due to age of accounts, whereas everything else is "excellent." I closed a bunch of them five years ago, and they are not in the score. Definitely possible that creditkarma doesn't score things exactly right, though it seems to be very close in my experience. I do have balances reported (10-20% bracket), but that's due to business expenses which get paid off every month.