Unused credit cards

[CptObvious]

I opened some store cards some years back (e.g. Best Buy, Old Navy) that I don't use much anymore. In the past year I've opened 3 other credit accounts that I use more frequently. Will closing my store accounts hurt or help my credit score? (none of them are my oldest account) Thanks

 

[LukFilm]

It WILL hurt your credit score. Keep them open, and make a small charge once a year so your credit card company doesn't close them on its own.

 

[RadiclDreamer]

And just why would it hurt his credit. From what i understand having mass amounts of credit available is what hurts your credit

 

[Trikat]

If you have too many as RadiclDreamer says won't it hurt your credit?
But I know if you have 2-4 cards and you do not use 2 or 3 of them it is better off keeping them.
Also does anyone know if Capital One cancel their cards if you don't use it? I cut up mine already, but haven't closed the account (which is a stupid move).

 

[QED]

Having too many credit cards is typically not a problem.

Having too many credit cards with balances is the problem-- it is an indicator of financial unsteadiness.

I say if the cards don't have any balances, don't worry about them. Closing an unused credit account is typically will net an overall negative impact on your credit score-- you lower your available balance (which raises your overall credit utilization percentage), and you typically lower your average credit age (although in this case it doesn't sound like that would be a positive).

The longer an account has been open, the less likely I would be to close it even if I never used it. In fact, the longer an account has been open, the more I go out of my way to ensure that it isn't closed on me by making a few purchases from time to time.

 

[spacejamz]

Originally posted by: RadiclDreamer
And just why would it hurt his credit. From what i understand having mass amounts of credit available is what hurts your credit

From 4 credit scoring myths on msn.com

Closing accounts can help your credit score
No, no, no. For the umpteenth time: Closing accounts can never help your credit score, and may hurt it.

Every time I write this, I get more e-mail from people who say their mortgage lenders told them exactly the opposite. It's true that having too many open accounts can hurt your score. But once you've opened the accounts, you've done the damage. You can't repair it by shutting the account, and you may actually make things worse.

The credit score looks at the difference between your available credit and what you're using. Shut down accounts, and your total available credit shrinks, making your balances loom larger, which typically hurts your score.

The score also tracks the length of your credit history. Shutting older accounts can also make your credit history look younger than it actually is, which can hurt your score.

 

[I Saw OJ]

Heres a better question.

Why on earth would you need an Old Navy credit card?

 

[dullard]

For the optimal credit score:

1) You need a minimum of 4-5 open lines of credit (loans, mortgages, credit cards, etc).

2) You need at least one of those lines of credit to show a $0 balance. Note: even if you pay off your CC in full each month, you probably never have a $0 balance. Why? Because you have already charged things for the next month by the time last month's payment went through. Thus, you should have at least one CC that you leave unused for 2 months straight to guarantee you have a $0 balance on one.

3) RadiclDreamer: having mass amount of credit helps your credit score. But credit score is only part of the picture. It may hurt you getting loans to have mass amounts of credit, but it'll help your credit score. Two different topics.

4) Thus, CptObvious, there is probably no reason to close your store accounts other than to minimize your minimal risk to identity theft. Closing them will not help your credit score, it could even hurt if you close all your accounts with a $0 balance.

 

[Nyati13]

Originally posted by: RadiclDreamer
And just why would it hurt his credit. From what i understand having mass amounts of credit available is what hurts your credit

It would hurt him in two ways.
1. The credit age is a mix of single oldest account, and average account age. By closing several of his older accounts, his average age will get "younger".
2. The credit limits of those accounts would no longer be available for the total debt to credit ratio, which would cause the ratio to increase, which is bad for your score.

Closing the accounts could help his score long term only if he has too many lines of credit. 8 to 10 is considered good, more than that can starts impacting your score.

I would suggest rolling a grocery bill or tank of gas onto one of the cards per month, and let a small part of the balance roll across a billing cycle to show activity. *edit, nevermind, I just noticed you said store cards... hmm, just keep them, and use them if you ever buy something from that store..*

 

[rml]

if you do a google search on "close credit card" & "score" (http://www.google.com/search?hl=en&q=%2...22+%26+%22score%22&btnG=Google+Search), you will find many articles on this issue. Basically, closing the account might hurt your score (especially when you closed the right that is the oldest).

 

[spacejamz]

2) You need at least one of those lines of credit to show a $0 balance. Note: even if you pay off your CC in full each month, you probably never have a $0 balance. Why? Because you have already charged things for the next month by the time last month's payment went through. Thus, you should have at least one CC that you leave unused for 2 months straight to guarantee you have a $0 balance on one.

😕why would you need an account with a zero balance? They look at your overall balance to limit ratio.

 

[dullard]

Originally posted by: spacejamz
😕why would you need an account with a zero balance? They look at your overall balance to limit ratio.

Overall balance to limit ratio is only one of many factors in your credit score. Other factors are late payments, number of credit cards with $0 balance, length of history, etc.

 

[CptObvious]

Thanks for the responses :thumbsup:

Originally posted by: I Saw OJ
Heres a better question.

Why on earth would you need an Old Navy credit card?

lol

I think I was making $50 of purchases and they offered me 20% off to open a card. So I was suckered in for $10.

 

[spacejamz]

Originally posted by: dullard

Originally posted by: spacejamz
😕why would you need an account with a zero balance? They look at your overall balance to limit ratio.

Overall balance to limit ratio is only one of many factors in your credit score. Other factors are late payments, number of credit cards with $0 balance, length of history, etc.

From fico.com
your score is made up of the following:
35% Payment History
30% Amounts Owed
15% Length of Credit
10% New Credit
10% Types of Credit

There are no extra points for have accounts with zero balances.

 

[dullard]

Originally posted by: spacejamz
30% Amounts Owed

From your link:

Amount owing on accounts
Amount owing on specific types of accounts
Lack of a specific type of balance, in some cases
Number of accounts with balances
Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

All I can say is that if (# of accounts) = (# of accounts with balances), then you are hurt ~5 points on your credit score. It is a small effect, but a real effect.

 

[QED]

Originally posted by: dullard

Originally posted by: spacejamz
😕why would you need an account with a zero balance? They look at your overall balance to limit ratio.

Overall balance to limit ratio is only one of many factors in your credit score. Other factors are late payments, number of credit cards with $0 balance, length of history, etc.

Dullard,

Just curious-- where did you get this information?

Is this something recent?

I used to work in the mortgage industry (in fact, I helped create the application scoring system used by one of the largest mortgage lenders) and have seen literally thousands of credit reports, but in my whole time I don't ever recall seeing anyone dinged because they had too few cards with $0 balance. I've seen plenty of the opposite, though, where a borrower got dinged for having too many accounts with a balance.

 

[dullard]

Originally posted by: QED
Dullard,

Just curios-- where did you get this information?

Is this something recent?

I used to work in the mortgage industry and have seen literally thousands of credit reports, but in my whole time I don't ever recall seeing anyone dinged because they had too few cards with $0 balance. I've seen plenty of the opposite, though, where a borrower got dinged for having too many accounts with a balance.

I don't know how recent it is. But every time I run my credit reports through different analyzers, they say I can boost my credit score by ~5 points if I simply had a $0 balance on one of my cards. I have near perfect credit scores. And this is the one and only ding that keeps repeatedly showing up. I suppose I should one day actually follow that advice. But I'm too lazy and I don't think it'll actually impact me in any way to have a slightly higher score when it is already quite good.

Then just use common sense. If part of the score depends on the number of accounts with balances (as the FICO link above shows), then wouldn't it therefore also depend on the number of accounts without balances? These are not independant things. If the number of accounts with balances changes, then the number of accounts without balances changes. It is just another way of saying the same thing.

Wouldn't it be wonderful if we actually had access to the formulas? I realize the formulas are trade secrets and protected intellectual property, but I can dream can't I?

 

[spacejamz]

Originally posted by: dullard

Originally posted by: spacejamz
30% Amounts Owed

From your link:

Amount owing on accounts
Amount owing on specific types of accounts
Lack of a specific type of balance, in some cases
Number of accounts with balances
Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

All I can say is that if (# of accounts) = (# of accounts with balances), then you are hurt ~5 points on your credit score. It is a small effect, but a real effect.

I guess you do learn something new everyday...since I have a bunch of accounts with zero balances (all of my older department store cards - sears, pennys and radio shack that i have had since the early 90's have been zero for awhile) never really paid attention to this...thanks...

 

[LukFilm]

Originally posted by: RadiclDreamer
And just why would it hurt his credit. From what i understand having mass amounts of credit available is what hurts your credit

LOL, I have 40 credit cards and a great score. You REALLY should learn more about it. Your future depends on it.

 

[QED]

Originally posted by: dullard

Originally posted by: QED
Dullard,

Just curios-- where did you get this information?

Is this something recent?

I used to work in the mortgage industry and have seen literally thousands of credit reports, but in my whole time I don't ever recall seeing anyone dinged because they had too few cards with $0 balance. I've seen plenty of the opposite, though, where a borrower got dinged for having too many accounts with a balance.

I don't know how recent it is. But every time I run my credit reports through different analyzers, they say I can boost my credit score by ~5 points if I simply had a $0 balance on one of my cards. I have near perfect credit scores. And this is the one and only ding that keeps repeatedly showing up. I suppose I should one day actually follow that advice. But I'm too lazy and I don't think it'll actually impact me in any way to have a slightly higher score when it is already quite good.

Wouldn't it be wonderful if we actually had access to the formulas? I realize the formulas are trade secrets and protected intellectual property, but I can dream can't I?

I would take what those analyzers say with a very tiny grain of salt. The one that is actually endorsed by Fair Isaac has been purposefully "dumbed down" to prevent people from figuring out the exact algorithm used-- so while it is good tool in general, it fails in certain extreme situations.

And the ones that weren't written by Fair Isaac-- well, they are just guessing at that point since they don't have access to the actual algorithms used.

I think a better test of what might improve your credit would be to look at the actual score factors on your credit report-- they are listed in order of importance. But even those can sometimes be misleading for people with very good credit. But as far as I know there isn't even an indicator code for not having an account with a $0 balance...

 

[dullard]

Originally posted by: QED
I think a better test of what might improve your credit would be to look at the actual score factors on your credit report.

I have done that like I mentioned above. And the credit reports say I need one balance with $0.

The FICO link above specifically mentions that the number of accounts with balances is a factor. If you want to deny what I claim that is fine as I'm not going to scan in my credit reports to show all of ATOT, but now give me reasons to deny what FICO says.

 

[EKKC]

i closed a few unused accounts a few months ago, i doubt it will hurt you much, i rather be safe than sorry. let a few points hurt me short term than to let the cards sit there and potentially be stolen by or the information leaked out to identity theft. i still have like 4 cards active now. 2 AMEX that i use the most, a citicard for gas (5% back) and another mastercard that i never use. my AMEXs has 15k credit each (which i use about 10-20% of the available credit a month) but all those stupid cards like discover, etc etc i've cancelled. it was a pain to cancel though. like cancelling AOL

 

[QED]

Originally posted by: dullard

Originally posted by: QED
I think a better test of what might improve your credit would be to look at the actual score factors on your credit report.

I have done that like I mentioned above. And the credit reports say I need one balance with $0.

The FICO link above specifically mentions that the number of accounts with balances is a factor. If you want to deny what I claim that is fine as I'm not going to scan in my credit reports to show all of ATOT, but now give me reasons to deny what FICO says.

Look, Dullard I think we are coming at this from two perspectives.

I do know for a fact that the number of accounts with balances is a factor, I even stated that earlier. But there is nothing magical about having at least one account with a zero balance.

Of course, paying down or off an account almost always helps your score... but the reason for that is rather obvious.

Let's supposed you have two people. Person A has a total of 5 accounts, 1 one of which she has never used ($0 balance). Person B has total of 4 accounts, all of which are actively used and carry some balance from time to time. Other than that, Person A and Person B have pretty identical credit profiles: they have the same total outstanding balance, same total credit limit, etc.

I contend that Person A has no advantage whatsoever over Person B for simply carrying one extra card with no balance and no usage, and my experience in the credit industry backs that contention up.

 

[dullard]

Originally posted by: QED
I contend that Person A has no advantage whatsoever over Person B for simply carrying one extra card with no balance and no usage, and my experience in the credit industry backs that contention up.

You can contend that all you want. Fact is you don't know the formulas and have never really worked in the part of the industry that calculates the scores. Its like saying a carpenter is an expert in electrical wiring. No, an electrician is an expert. A carpenter may work in the same industry, but the carpenter does not know all the electrical code details. The credit agencies tell me it is a part of the score, and they tell me I need a card with $0 balance to improve my score. I'll trust the people who calculate my scores far before I'll trust someone who just uses the scores.

Suppose I have 8 accounts. Suppose I have 6 accounts with balances, then I have 2 accounts without balances. Suppose later I have 4 accounts with balances, then I have 4 accoutns without balances. The number of accounts with balances is a factor as the FICO link says. But with my currently fixed 8 accounts, the number of accounts without a balance is inversely related. They are not independant factors. If one has an impact on my score, then the other has an opposite impact on my score. It is just two ways of measuring the same thing. True, I could open a 9th card, but that doesn't alter the logic at all.

I think neither of us will convince the other. So, I'm bowing out of this thread. Have a great day.