Is it a good idea to close credit cards that I don't use at all?

Question

Here is my situation. I have $7500 I owe on a 0% credit card that expires in March 08. I want to transfer that balance to a different 0% credit card in February to avoid finance charges. Also have college loans that I am paying back as well so I have a total debt of $15,933. I have a total of $40,000 of credit that I can use spread out through 14 cards. I want to buy a house in a few years. My FICO score is 714. I was 90 days late on a card payment in January 06 and a derogatory mark from April 04 that has been paid (forgot about the card and they sent the statement to the wrong address)

I don't like having these credit cards open. Will closing all these accounts affect my FICO score negatively when I buy a house in a few years? Does closing unused cards make it easier to sign up for another 0% credit card account with a credit limit near $7500?

Answer 1

Credit scores are based on the following;

1. Payment history 35%
2. Time in bureau 15%
3. Types of credit 10%
4. New credit 10%
5. Debt to credit ratio 30%

If you close a lot of old accounts you will have a negative impact on numbers 2 & 5. This could cause your score to go down a lot if most of these cards have no balance and you close them.

The number of cards you have is not important, what is, is how you manage them.

Answer 2

If you're going to close any cards, do not close the oldest ones. Part of your score is determined by the length of time that you've had credit. If you're not planning to buy a house for a couple of years, by the time you do, your credit score will be back up by then if you do take a ding to it now when closing a few cards. You could also just cut the cards up and leave the accounts open so you don't have to use them.

You also don't want a lot of credit cards. Lenders can then think you're a risk if you have more available credit than your income should allow, however, you don't want to lower your available credit to balance ratio either. If you make a lot of money, having a lot of available credit is fine, the lenders won't see you as a risk because they would see you as being able to pay it off.

Personally, I wouldn't close any of them.

Answer 3

There are a lot of schools of thought on whether or not to close unused credit cards.

Do not close any till you get that $7500 credit card debt paid in full. Then keep the two oldest major credit cards that do not have annual fees. Only keep store or gas charge cards if you have some special reason.

Close the rest. Do it via letter and ask for confirmation that the account is closed. All those open accounts still have to be monitored and secured and are opportunities for big problems.

Answer 4

Buy a house. Refinance. Deduct everything, especially if you make lotsa money, which you probably do. Or you could just listen to the experts and don't close out your accounts. If you slow---ly close the accounts, your score will go down but not as drastically as if you close them all at once. You may want to consider cutting back on your expenses to put the largest down payment on a house that you possibly could. The quicker you build equity, the better. If you are, say, 30 years old, you really really should consider real estate, do some more research on this because that is your best bet - the more equity you have, the higher your score will climb. So look up some more houses, I'm sure you could find one in a decent area.

Answer 5

Keep in mind that when you look to transfer the remainder of your balance in February, you could start by calling up your current unused credit card companies and asking what kind of balance transfer rate they will give you. Mention that you are considering closing the account unless you can get a decent balance transfer rate. They may offer you a good rate (even 0%). That process can be a lot easier than applying for a new card.

As far as how closing accounts affects your credit score, that depends on many different factors. Here is a decent FAQ on this subject:
http://www.e-wisdom.com/credit-cards/apply-for-a-credit-card.html#credit-cards-keep-or-cancel

Answer 6

Credit card balance transfer is one of the preferred ways to get rid of credit card debt and is used by many people to get immediate relief. Credit card balance transfer essentially means that we transfer our outstanding balances from a high APR credit card to a credit card which offers low APR's. A 0% Intro APR credit card is the preferred credit card to transfer balances, but because of the widespread misuse of such credit card offers, credit card companies have withdrawn all such offers.

Indeed balance transfer saves a lot of money and can save things from going worse, but many people simply don't know the right way to do balance transfer. This article takes a look at the correct process to initiate and complete the balance transfer.

The first thing to look out, when a person wants to transfer his balances is a credit card which offers the lowest apr rates and lowest balance transfer fees. Many online credit card companies offer credit card comparisons. It is indeed a good practice to search for the credit cards using their services and decide on a credit card which offers the maximum savings. It is important to note here that balance transfer APRs depend on a person's credit history. If the credit card in question offers the lowest rates, it is definitely for those with the best credit ratings. There are different balance transfer apr's for people with lower credit ratings. So, it becomes imperative that one chooses the credit card which offers the lowest apr and balance transfer fees for his credit ratings. Read more from: http://www.credit-card-gallery.com/article/414,The_right_way_to_credit_card_balance_transfers

Answer 7

If you want my opinion and im sure you do. I wouldnt play the credit card game.
They make all the rules and can change the rules in the middle of the game. Just read the fine print.
If you play the credit card game sooner or later you will start losing and when you start losing at the credit card game it's hard to get out of the game.

High interest rates that they can raise for any reason. Outrageous late fees and over the limit fees. Not to mention Identity theft. which is on the rise.

Don't obsess with the I love debt score. All its good for is getting into debt.

And it is an I love debt score. You have to borrow money and make payments on time to get a high score. You have to keep borrowing money and keep making payments on time to keep a high score.

A low score from not paying your bills is trouble. If you have a 0 score from not borrowing money you can still get an apartment and job and home loan with manual underwriting. It's not a sub prime loan either. You can get the same low interest rates. it's the way it was done before the I love debt score.


Pay as you go. Live on less than you make. You will win with money.

Of course the bankers on here are gonna tell you different.

Debt free is the way to be!
borrower is definitely slave to the lender!

Answer 8

PooPooLa is unquestionably on the stunning song. the only element i does not accept as true with is reducing up the cardboard. save it & purchase a tank of gas or some groceries each couple months & pay it off each month. recently, banks have been the two reducing credit limits or remaining the acct altogether in case you do no longer use the cardboard. the two a variety of project's will injury, because it fairly is going to enhance your regularly occurring revolving (mastercard) utilization. no count what number taking part in cards you have, use them each sporadically to maintain the banks chuffed, and save the accts paid in finished to maintain your FICO ratings chuffed.

Answer 9

Accounts with zero balances that are closed by the consumer WILL NOT result in a negative rating. Accounts closed by the creditor will.

Answer 10

Go search the internet; there are plenty of articles from reputable sources who can discuss the pros and cons of closing accounts.

The big issues are
-too much credit can reduce your ability to get more because you appear to be a high risk for default
-closing old accounts can reduce your score by erasing part of your history