does it hurt your credit to close out long standing credit cards in good standing? If so why?

Question

I was going to consolidate two credit card onto a new lower interest card and cancel the old cards. However, I was informed that closing the old cards would not look favorably on my credit report. I thought this was strange as good credit reflects on your credit report for 10 years and keepin the old card open whould make your debt ratio higher. Can someone explain this to me?

Answer 1

What the other posters have told you is true. However, I personally don't believe in keeping open all credit cards just for the sake of having them.

In your case, I suggest keeping the oldest card open and closing the other. That way you keep the history and higher limit but end up with only 2 major credit cards instead of 3.

Answer 2

Yes, it does. Because long good credit history taking into at least 30% of the FICO score calculation for your credit score. Also closing credit card account will also effect your credit score in a bad way (lower your score). The debt ratio if the debt your owe over the credit limit, so you had it reverse. Your debt ratio should be lower since you do't owe anything on this card, and the credit limits only add to the available credit to calculate this debt ratio. And as long as you have this account open, it has no time limit for this account to be on your credit report (no limit to 10 years). Do NOT close this good long standing account. Just put it away and make sure to use it once in a long while, because some credit card company do close inactive accounts.

Answer 3

Having old credit cards shows a longer credit history, once you get rid of those it could drastically shorten that history unless you have other cards you got around the same time. Credit scores only go by when accounts were open so if you opened these cards ten years ago and then didn't open another card account for five by cancelling these it would shorten your credit history by five years. Also, if you keep those cards open it will show a lower percentage of your credit used. For instance if you have a total limit on those 2 cards of $10,000 and another card with $5,000 maxed out, the credit bureau sees you using 33% of your possible amount but if you closed those it would go up to 100%, making your score also go down. This can be kind of confusing but I hope I helped some.

Answer 4

There are two reasons not to close the account. First and foremost has to do with your credit history. Potential lenders (and scoring systems) like to see a long history of open credit accounts. They don't care if the account isn't being used - only that the creditor continues to grant you credit year after year. The other reason has to do with your debt to credit ratio. Potential lenders like to see you using less than 30-35% of your available credit. To calculate this ratio, they add up everything you owe (your credit usage), add up all the credit available to you (regardless of usage) and divide the former by the latter. So, suppose you have a credit card with a high limit that you are not using and several other credit accounts that you are using and then close the account that you aren't using. This will automatically and instantly raise your debt to credit ratio since you now carry more debt as a percentage of your total available credit. But suppose the account you want to close is maxed out. Then, if you pay it off and close it, your debt to credit ratio will lower (assuming your other accounts are not maxed out). Best just to keep it open and not use it.

Answer 5

they like to see long established credit and low balances compared to credit limit - if you have 2 credit cards - one with 1 10,000 limit and zero balance, and one with a 1000 limit and a 500 balance - your total debt/limit ratio is 500/11000 or less than 5%. If you close out the 10,000 acct , you debt ratio goes up to 50% and they look at you like a bad risk - using too much of your credit - just lock the high limit card away and don't use it or use it once every 6 months for a small purchase and pay it off right away, so the credit card company see that the acct is still active and doesn't close it out on you

Answer 6

You were given the correct advice. I have recently found out that canceling out a credit card (even after u have paid it off in full) is damaging to your over all credit rating. When you cancel it out what you do is erase all the good credit you achieved during the existence of the card. Thus making you have to start all over again. It's better to keep it (even if you don't use it often) because it shows your long time commitment. This keeps & can even enhance your rating over time.

Answer 7

don't close out old cards. What increases credit is a good ratio between credit limit and credit balance, so if you close cards, your credit limit will decrease and that'll lower your score.