Author Topic: Closing many credit cards at once?  (Read 4972 times)

Kansaslover5

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Closing many credit cards at once?
« on: July 23, 2014, 01:06:36 AM »
I recently have paid off many credit cards as I'm becoming a true Mustachian here. Since I have very little left to get to zero (3 months!!). I started closing some of the credit lines I opened in the past two years. Will this signifigantly hurt my FICO score at all? I know that credit card utilization would be an issue but since I'm about to be at zero debt I'm not too worried about that aspect.

SDREMNGR

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Re: Closing many credit cards at once?
« Reply #1 on: July 23, 2014, 03:34:28 AM »
If you can control yourself, you should just keep all accounts open and just not use them.  Having credit open, while not accessing them helps your credit score.  And having good credit makes all the difference.

Derrian

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Re: Closing many credit cards at once?
« Reply #2 on: July 23, 2014, 05:02:19 AM »
Closing accounts will definitely hurt your FICO score. Your score is based on many factors such as the number of accounts you have, amount of available credit, and length of accounts. If you close cards, your number of accounts and amount of available credit will both go down, lowering your score. My advice would be keep the accounts (unless there is an unreasonable annual fee) and use less than 10% of your available credit each month. This will show that you can use credit responsibly and should raise your score in the long run.

aj_yooper

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Re: Closing many credit cards at once?
« Reply #3 on: July 23, 2014, 05:27:20 AM »
I agree with Derrian and SDREMNGR.   Keep the accounts, but don't use them.  If you are an impulsive spender, however, put them on ice (literally) or close them.  Build up your emergency fund and general savings so you can go to cash, at least for a while. 

Good job!

Gerard

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Re: Closing many credit cards at once?
« Reply #4 on: July 23, 2014, 07:30:30 AM »
You can get a rough idea of what closing cards will do with an online calculator like
http://www.myfico.com/ficocreditscoreestimator/estimator.aspx

My guess is, as long as you keep your oldest card(s) open, and you use less than 10% of your available amount either way, closing the newer ones will affect your credit score by maybe ten points.

If your score is generally good, then if I were in your situation I would be tempted to close the newer cards and then apply for other new cards for the sign-up bonuses. But I understand that this is not a good strategy for everyone.

Nate R

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Re: Closing many credit cards at once?
« Reply #5 on: July 23, 2014, 08:41:32 AM »
I believe you need to use your card once every 6 months to keep it "active" in your credit score mix as an open, active, and available credit account. Clark Howard has mentioned this.

frugaliknowit

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Re: Closing many credit cards at once?
« Reply #6 on: July 23, 2014, 08:48:36 AM »
If you are going to do any closing, start with the newest card(s).  If you have more than 5 cards, I would close 1 per year, starting with the newest opened with the lowest rewards.  There's no harm in keeping them open if there are no fees and if you can control yourself.

Badass by 41

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Re: Closing many credit cards at once?
« Reply #7 on: July 23, 2014, 12:58:24 PM »
Does the general advice here also pertain to cards opened for travel hacking?

Greg

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Re: Closing many credit cards at once?
« Reply #8 on: July 23, 2014, 03:08:22 PM »
Be careful paying off the cc's completely.  I did this a few years ago and one of my business cc's closed my account, which was very inconvenient.  No reason was given, and they would not un-close it, and offered other less favorable cc's. I think they monitored my credit report and saw a pattern and realized I was paying everyone off.  Better to pay them down but keep using them for little things to keep them interested.

Kansaslover5

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Re: Closing many credit cards at once?
« Reply #9 on: July 25, 2014, 04:50:40 AM »
You can get a rough idea of what closing cards will do with an online calculator like
http://www.myfico.com/ficocreditscoreestimator/estimator.aspx

My guess is, as long as you keep your oldest card(s) open, and you use less than 10% of your available amount either way, closing the newer ones will affect your credit score by maybe ten points.

If your score is generally good, then if I were in your situation I would be tempted to close the newer cards and then apply for other new cards for the sign-up bonuses. But I understand that this is not a good strategy for everyone.

Yes, that was my intent precisely.

La Bibliotecaria Feroz

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Re: Closing many credit cards at once?
« Reply #10 on: July 25, 2014, 08:02:39 AM »
To me the important question isn't whether it will hurt your FICO score--it will in the short term--so much as whether you have an immediate need for an undamaged FICO score. If you aren't going to be applying for credit, what does it matter?

FrugalSpendthrift

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Re: Closing many credit cards at once?
« Reply #11 on: July 25, 2014, 08:12:49 AM »
To me the important question isn't whether it will hurt your FICO score--it will in the short term--so much as whether you have an immediate need for an undamaged FICO score. If you aren't going to be applying for credit, what does it matter?
+1

If you don't plan on borrowing money in the near future, then don't worry about it.  Just close what you don't want to use and simplify your finances.

Bateaux

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Re: Closing many credit cards at once?
« Reply #12 on: July 25, 2014, 10:38:47 PM »
I keep two cards a Visa and a Master Card.  I also have a debit card issued by Visa.  I'm totally debt free and pay cards off every month, so I actually make money using the rewards.  I use debit only for ATMs.  I have a checkbook and write one or two checks a month.  I also have a savings account where the emergency fund is kept.  Outside off that my investments are in the the stock market or real estate. 
Last time I checked my FICO was 800 something.  I don't need a loan but, it would be nearly instant if I decided to get one.  I'm not sure what I'd find out there that I'd want a loan for.   House has been paid off years ago.  If I need a car, I'll write a check and it will be a used car.
Just get here, debt free and 1m plus invested.  You won't give a rats azz about FICO or even buying anything.  If I feel I want something or a need arises I just get it.  I'm still working, but with FUMONEY even work isn't that big a deal.  Mentally knowing you can quit or be fired and have a roof over your head is powerful.   
Get here if you can.

Kansaslover5

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Re: Closing many credit cards at once?
« Reply #13 on: July 31, 2014, 12:04:04 PM »
Well the verdict is in. The closure of those cards shows up on my reports now and my FICO score didn't change at all. Mind you the two cards I closed had only been open for 1 year.

t-rymz

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Re: Closing many credit cards at once?
« Reply #14 on: July 31, 2014, 08:18:47 PM »
Do you have a immediate need for credit? Are you planning to buy a new house in the next several years? Anything big like that?

If you need credit soon, don't close the accounts yet. Keep them open but don't use them.

Otherwise, go ahead and close them! Get rid of that mental burden! Don't sweat the FICO score. You don't need much credit anyways.

Kansaslover5

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Re: Closing many credit cards at once?
« Reply #15 on: August 03, 2014, 04:59:26 AM »
Agreed. Closing the three accounts (opened in the past 18 months) actually helped my score and makes me feel better. Less temptation to go back and use them again. I have no need for credit but I do monitor all of my accounts like a hawk.

MrsPete

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Re: Closing many credit cards at once?
« Reply #16 on: August 04, 2014, 08:40:24 AM »
I'd argue that credit scores are vastly overrated. 

If you're making choices that are good for your long-term financial good, your credit score will fall into place.

Here's an example of how credit scores aren't really all they're cracked up to be:  Some 17-18 years ago my husband and I bought a car and financed a part of it.  When we were doing the credit application, the salesman commented, "We don't see many of those."  When we asked what he meant, he said we had a perfect credit score.  Not good, PERFECT.  He actually showed it to his boss.  Fast forward a few years:  We paid off our mortgage, purchased a larger house with no mortgage, moved up on the salary scale, increased our savings -- in short, we were doing better financially.  We no longer needed to borrow for anything.  And what happened to our credit score?  It went down. No, we didn't stop paying our bills; rather, the score went down because we were no longer making payments on various things, and that hurt the score. 
 
Has our dip in credit score hurt us?  Not at all. No, we aren't paying more for insurance, aren't unemployable, etc. 

So a person who is really financially secure doesn't automatically have a good credit score:  Keep the real goal in mind, and remember that the banking industry values your ability to pay -- not your savings.

Back to the original question: Ask yourself what's best for your long-term financial security. The right choice is probably NOT keeping open a bunch of small accounts. 



Kansaslover5

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Re: Closing many credit cards at once?
« Reply #17 on: August 06, 2014, 11:43:32 AM »
Agreed MrsPete. That's why I closed them. That said. I do want to keep a high score for one particular reason: the airline miles and credit card rewards game. Getting free plane tickets with credit cards (paying them off in full every month and manufacturing spend of course) is a huge benefit for my family situation over the next few years.