FICO score question: cancelling credit card (loans, interest rate, annual fee, rate)

[findingmesomeday]

I have a credit card that for some reason I opened a few years back when we just started the process of rebuilding our credit after some serious financial devastation. I should have researched this card more carefully because it came with lots of fees. But at the time, I wanted access to emergency funds, should I need them---even if it was $500.

So I still have this card I used it once, to buy a set of new tires after two of mine blew out. I paid it off in 2 months. But I left the account open after reading here how closing an account can lower your credit score. However, I get a $6.00 monthly charge and a $48 annual fee. Interest rate is low--8% but the fees more than make up for that.

I have another credit card now that is a much better deal financially and would like to close this one since it's costing me money just to have it open, whether or not I have a balance. If I close it, will it adversely affect my FICO score?

[RTTNFAM]

Keep the card! It shows you have a long time established history of credit. $6 a month and $48 a year isn't that bad for a card that is continuing to help you with your credit...IMO.

[mystree]

If it's costing you that much I would ditch it. It will hit your credit but it rebounds quickly.At least when I've closed cards.I've noticed mine rebounded in 4 months.

[suzie02]

Close the card. Your should only worry about its effect on your FICO score if you are borderline and applying for a mortgage.

[VegasGrace]

It's not worth the money for just a few points. After 6 months you are out a few bucks...but after closing it....your fico rebounds in about that time.

Don't fall prey to the cc companies...they know there are those out there that are willing to PAY, and pay dearly, to keep cards open.

[Moonlady]

It's true that an older line of credit boosts your credit score. What I would do is call the cc company and tell them you don't want to pay the fees and ask if there is another alternative. They may increase your interest rate and do away with the fees -which is OK if you don't plan to use the card anyway. That way you get to keep the line of credit open and don't have to pay for it. If they won't cooperate, by all means close it, but since you don't owe anything, they may try to keep you.

[rcarrillo]

Originally Posted by Moonlady

It's true that an older line of credit boosts your credit score. What I would do is call the cc company and tell them you don't want to pay the fees and ask if there is another alternative. They may increase your interest rate and do away with the fees -which is OK if you don't plan to use the card anyway. That way you get to keep the line of credit open and don't have to pay for it. If they won't cooperate, by all means close it, but since you don't owe anything, they may try to keep you.

Great advice! You would be surprised what you can negotiate with credit cards if you are in a strong position (or even in a weak one). Ask them to do away with the fees now that you have built up credit, many will do it to keep you as a customer.

If not then close it unless you are planning to make a car or mortgage purchase in <6 months. It will hurt your score a little but only briefly. If you have other accounts and are paying them on time it shouldn't make much of a difference in 6-12 months.

[RTTNFAM]

Originally Posted by Moonlady

It's true that an older line of credit boosts your credit score. What I would do is call the cc company and tell them you don't want to pay the fees and ask if there is another alternative. They may increase your interest rate and do away with the fees -which is OK if you don't plan to use the card anyway. That way you get to keep the line of credit open and don't have to pay for it. If they won't cooperate, by all means close it, but since you don't owe anything, they may try to keep you.

I agree! Get with the CC company first and see what kind of bargain you can make.

[bentlebee]

Also the more cards you have the more you are at risk for ID theft, so if you can do what the privous poster said and otherwise close it. I had several cards at the same bank...because I started out with a secured credit card and thn was allowed to open an unsecured and they offered me a rewards card. My secured card was changed into an unsecured card but the rewards card is much more attractive to me ( I love to receive the giftcards for free) and so I asked the bank if there was a solution to close the account without effecting my credit score and they told me they could move the limit over to the other card and that way it wouldn't effect my score at all. I did and by the way I don't need car loans or a mortgage so my score is only effecting me for insurance issues, but it is always good to have a good credit score, it feels better and just in case you need it.

[findingmesomeday]

I'm worried about the score in the short term because my husband is unemployed and I think it's going to go against him if our score drops below a certain level. In the long term, we're probably at least 1-2 yrs from purchasing a house again so I'm not too worried about a short term drop there.

I will call the card company first though to see if they'll drop the fees.