Canceling Credit Card-Bad or Good?

Question

I've asked this question before, but didn't get alot of responsese the first time, and some of the responses were confusing. So I ask, is canceling a record good or bad. Can it hurt your credit.

And Let me add, that the balance on the card is zero. Will it still hurt, even if u have paid off the card, and now to choose to cancel it.

Answer 1

Mel has the right idea but a bad example -- Capital One does not report credit card limits! Well, they got sued and gave in, so they are supposed to start reporting soon.

Canceling a card is never good -- first of all utilization will be lower, and second of all it will have no impact on the "age of accounts" part of the report for the first 10 years (because the record will remain and the history will still count).

Answer 2

having "open trade lines" ( with low balances and no lates) are very good for your credit report and very important when applying or a home loan. To get the best rates from a mortgage company usually requires atleast two open accounts for a specific amount of time.
If it is an account with a low balance and good pay history you do NOT want to close it.
(I am the manager of a mortgage company)

Answer 3

Yes, canceling a card is not good.

Debt to credit ratio is when they measure how much $$$ in open lines of credit you have vs. how much of the credit lines you have used up.

Here is a sample situation:

Citibank
Credit line: $30k
Credit used: $7k

Capital One
Credit line: $12k
Credit used: $0

Macy's
Credit line: $5k
Credit used: $700

American Express
Credit line: $15k
Credit used: $2200

TOTAL OPEN CREDIT: $62,000
TOTAL DEBT: $9,900

If you canceled that Capital One card, your credit line would decrease by $12k - meaning your total credit available to you would now be $50k instead of $62k. That would lower your debt to credit ratio, therefore lowering your credit score.


P.S. Teehee - I was just pulling card names outta the air for the sake of providing an example.....I certainly wasn't endorsing any of those cards or anything :-)

Answer 4

You hang on to the credit card you have had the longest - that gives a longer history. You could reduce the debt ratio by asking them to lower your spending limit too. Get rid of the others that are newer. The combined spending limit on all three cards is what could make lenders think you are/could be over extended.

Answer 5

Yes, it reduces your debt to available credit ratio

Answer 6

http://www.bankrate.com/brm/news/cc/20020102a.asp

Hope this helps, even if it hurts your credit in the short term, your much better off in the long.