For credit experts only...?

Question

I have good credit, but I have 4 credit cards (retail accounts) that I don't use. I have one credit card through my bank that I do use occasionally. I have no debt. I have heard that closing my unused retail accounts would actually lower my credit score. Is this true? It thought closing them would help my credit, as it seems that people can be denied the best interest rates due to "a large number of retail accounts." Enlighten me please...

Answer 1

Just use the credit cards every so often, and pay the bills when they come, it won't hurt you.

Answer 2

By opening 4 credit cards and not using them, you have hurt your score. Until a credit card can report your repayment history, you will not benefit from opening or closing these accounts. By closing all of them, you will lose 1 factor used "Length of time accounts have been established".

Hope this helps as well

Recipe for a credit score
To calculate a score, Fair Isaac uses 22 pieces of data collected from the three major credit bureaus, Equifax, Experian and TransUnion). The lowest possible score is 300, while the highest is 850.

The final number is a composite of individual ratings in five categories:
•Payment history (35% of the rating)
•Length of credit history (15%)
•New credit (10%)
•Types of credit used (10%)
•Debt (30%)
Income is not a factor. "A person can have a very high income and never pay their bills," explained Craig Watts, public affairs manager for Fair Isaac.

Fair Isaac calculates a FICO score based on the data provided by each credit bureau. It's not uncommon to see up to a 50-point differential between ratings. The reason: Bureaus collect data at different times of the month, and one bureau may have inaccurate information.

Answer 3

It depends on who you ask. If you have multiple accounts open in which you don't use and they have high credit limits, a lender could view that as a negative because of the high amount of available credit you have available to you if you should get into a jam.

Here are some additional items to consider:

1) 15% of your FICO score is based on the length of your credit history. There is the possibility that if you close a card in which you have had it for quite a while, it may lower your score because in a way you would be decreasing the length of time you have had established credit.

2) 10% of your FICO score is based on the types of credit you have (i.e. credit cards, retail accounts, loans, etc.). The score also takes into account the number of accounts you have overall and the number of accounts you have for each type of credit. With you having four retail accounts, that could potentially be a negative.

Answer 4

Having no credit or unused credit can cause your score to be lower. However having many open accounts and not using them will also lower your score. You are seen as not "building" credit. You should use one card frequently even if you pay off the balance each month. Close old accounts that you dont want or use. Scores go higher as you use credit wisely but believe it or not, if you dont use credit your score will be lower. Try obtaining and using a debit card and cancel your unused accounts. Close store accounts as they have the highest interest rates...usually 18 to 24%.

Answer 5

I would opt for having Visa/MC type credit cards and NOT store credit cards. I'd also be using my cards every so often and paying off the balance, so that the companies will report you to the bureau and you can build a favorable credit history.

Suze Orman has a lot of useful info on her site.

Answer 6

The accounts that are open but unused are at your disposal, and heavily considered in your credit score. Those accounts are viewed as possible debt as long as they are "open accounts"
Each account is viewed as if the full credit limit were used
Close the cards asap
You will see an improvement in your score

Answer 7

LJRobbie and juncogirl are wrong and give terrible advice. Do your research! Stop over at http://www.myfico.com

This is the home site for the folks who developed the FICO scoring system, and they give tons of educational material and advice on how to improve your score.

To answer your question....the only think I see wrong with your situation is having 4 retail accounts. That's not that bad, but it could be better. It is generally recommended that you have 3-5 credit cards (2 should be retail).

But as the other responders state, there are two other major factors related to your credit score. Credit history and debt/credit ratio.

Your credit limits are also a factor. Lendors get reall nervous when they see someone with $50k in available credit on their history, and that will lower their score. But I'm going to bet these retail stores that you have are NOT giving you more $10k in credit...so the limit's are not going to be a factor. It should not be a problem in your case.

When you cancel the cards, you will lose a portion of your credit history. That WILL lower your score. And canceling empty cards will lower your debt/credit ration, and that too will lower your score. Here's why.

Lets assume you have 5 credit cards with a total debt of $1000. Your total credit limits on all 5 are $10,000. Therefore, your debt/credit ration is 10%. Very good. Anything over 25% begins to hurt your credit score.

Now lets kill 3 of those retail cards. Lets assume that the combined credit limit on those cards is $5,000.

You now have a credit limit of $5,000, but you still have that $1,000 debt. Your new debt/credit ratio is 20%. By canceling those cards you have doubled your debt/credit ratio and are closing in on a bad rating.

To make it worse, if the cards you are closing are older cards, that will destroy your credit history.

What I would suggest is get the credit limits lowered on any of those retail cards that is excessive. You don't need a Target card with $2000 credit limit. Drop it to $500.

Use your regular credit card to make payments on things you normally pay cash on, such as utilities or groceries. Pay the bills off each month, but keep a few dollars on the balance to help establish a credit history. This works real good if you have a card with cash-back plans on it.

Occasionally use those retail cards, but again be sure to pay them off.

Do these things and you will be amazed at how much your credit will improve in a few months.

Answer 8

it is good to keep 4,5 credit cards, but use them once in 6 months, because they will be reported to credit agency's - no active. it's really not important how many credit cards you have- if you keep your balances below 35%. never cancel your oldest accounts- they are your credit history.if you don't abuse your credit cards, your credit score will be excellent. i have costumers with more then 10 credit cards and his credit score was 840- never see before and after credit score like this, but his credit was built over time and that what counts- the longer credit history , the better score. he was 31 years old- pretty impressive.