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Is your credit score going to be important for anything in particular over the next year?
Is that period of time accurate? Knowing precisely how long closing a credit account could adversely affect one's credit rating is critical to deciding whether and when to do so.
I have three open major credit card accounts and two store credit accounts. I just opened one new major credit card account and one new store credit account, so I have a desire to eventually close a major credit card account, if for no other reason than four or five years down the road, when there is some better credit card offer made available to me, that I'm not turned down for having too much open credit. If "one year" is correct, then I should hold onto all my credit cards for at least another year or two, since that'll still allow me time to cancel it and have its negative impact worked out of my credit rating before I make my next credit move. Yes?
I want to get rid of my credit cards. I've been told and have read conflicting opinions on how much it affects credit scores. My scores are excellent, and I'd like to keep it that way.
Why do you want to get rid of them? Why not just toss them into a jar and forget about them. If you never use them again, over time your credit rating/score will go down, but if you cancel your cards your credit rating will drop overnight. If you paying a car loan and mortgage, you could still maintain a good to excellent credit score, but if you have no debt, in time you will have no credit either.
your AAoA (Average Age of Accounts) won't be affected for a long time, as any tradelines you close stay on your reports for either 5 or 7 years (forgot which one) after you close them.
The only hit you'd take is to your utilization percentage, as you'd no longer have those credit lines available. This is assuming you still have at least one card active with a balance on it.
Also, you may want to leave at least one card open, as I believe FICO punishes your score if you don't have at least one CC (three to four open cards is ideal).
Whatever you do, DON'T CANCEL THAT ONE! The length of time a revolving credit account (such as a credit card) has been open plays a role in your score, with older accounts counting for more than newer ones, so a very old no annual fee card is a valuable thing to keep around.
Just charge something on the card every six months (and then pay the charge off in full) so the issuing bank doesn't decide to close the account for insufficient activity.
I'm not going to make any major purchases in the next year. I just don't want to shoot myself in the foot in case down the road we want to buy a different house.
All my cards are no fee.
The oldest card is about 30 years old...
Wait, so why are you closing it if it's no fee? Put it away, pull it out and pay for a $.99 cup of coffee at the gas station every six months, and pay it off a couple weeks later.
Quote:
Originally Posted by bUU
Is that period of time accurate? Knowing precisely how long closing a credit account could adversely affect one's credit rating is critical to deciding whether and when to do so.
I have three open major credit card accounts and two store credit accounts. I just opened one new major credit card account and one new store credit account, so I have a desire to eventually close a major credit card account, if for no other reason than four or five years down the road, when there is some better credit card offer made available to me, that I'm not turned down for having too much open credit. If "one year" is correct, then I should hold onto all my credit cards for at least another year or two, since that'll still allow me time to cancel it and have its negative impact worked out of my credit rating before I make my next credit move. Yes?
To address the first point, all credit bureaus use proprietary formulas to determine credit ratings, so nobody knows exactly how long; but if your credit is otherwise consistent, I'd say it wouldn't be too difficult to bounce back within a year from the hit of dropping a mid-aged credit card.
I highly doubt you'll be turned down for having too much open credit, especially if your credit score is good. To keep your credit score good, you'll want to continue to age your accounts over the years. If you're cancelling multiple credit cards, especially if they're in the upper half age (i.e. you've had them longer than the average age of credit), I'd venture to say it'll take longer than a year to bounce back, and will further hurt your eligibility for another card down the road because of the lower revolving credit number.
I think I need to head over to the Retirement forum to inquiry about credit strategies in retirement. It seems to me that it becomes a lot harder to get a credit card (to take advantage of great benefits like cashback) once you're retired, since you have no source of earned income.
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