Is Credit Card cancellation a terrible thing?
Credit Card
firstclass088 asked:
I have 3 opened credit cards. I have Capital One, Citi Card and Victoria Secret. I have just paid off my Capital One card but I really want to close it because since I paid it off and Im not using any of my cards I don’t want this one opened. I am also in fear that the company might try to charge me with some kind of fee or whatever. But I had it opened since March. Is closing it now a bad thing? Will closing this card mess my credit score up?
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I have 3 opened credit cards. I have Capital One, Citi Card and Victoria Secret. I have just paid off my Capital One card but I really want to close it because since I paid it off and Im not using any of my cards I don’t want this one opened. I am also in fear that the company might try to charge me with some kind of fee or whatever. But I had it opened since March. Is closing it now a bad thing? Will closing this card mess my credit score up?
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February 18th, 2009 at 3:44 am
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Unless you have to pay an annual fee, do NOT cancel them, just cut them up and stop using them. They have to notify you if they intend to charge an annual fee- in that case I would either cancel or call to switch to another program to keep the line of credit as open on your credit report.
If you cancel them, your credit score will go down since you have so few lines of credit.
February 18th, 2009 at 9:32 pm
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That Capital One card just barely counts in your score. It sounds like you have a very limited credit history. If the Capital One account hasn’t charge you an annual fee already, it isn’t likely to start.
About a third of your credit score is based on the ratio of revolving debt to available credit limit. If you close an account, you lower you overall available credit limit. This would increase your debt ratio if you are carrying balances on any other cards. Carrying balances of more than 30% will hurt your score.
If you have balances on your other credit cards. Do not close any accounts till all your cards are paid in full. It would be smarter to keep the two major credit cards and close the store credit card, unless you get special deals.
It would be much better for your score to use both major cards periodically and pay the balance in full every month. This will build a good credit history (the longer the history,the better the score), avoid interest and keep you out of debt.
If you do decide to close any credit cards, do it via mail and request written confirmation that the account is closed and 0 balance. Keep your request and the confirmation in your ‘forever’ financial file.
February 19th, 2009 at 1:40 am
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The effect of closing it will be nominal and temporary on your credit score. Do not let it stop you from closing it. It would certainly be so nominal as to not make a difference in anyone’s lending decision to you.
Plus the party that desires the account closed is important. You want to be one closing it instead of “Capital One” asking for that later.
February 20th, 2009 at 12:54 pm
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Cancelling a credit card is a VERY minor mark on your credit report.
Having too many open credit cards, whether owe money or not, can have a negative affect on a loan application in the future, becuase they count that entire amount of available credit as if you are owing it. IT’s called your Total Debt Service Ratio. They factor it as it you are owing becuase if you rack up the cards, they need to make sure that you can still make the loan payments.
If you atren’t using them, you might as well cancel them.
That being said, don’t put yourself in a position where you have no emergency funds available to you at all.