Credit Scores and Open Credit Cards

17 years ago

Hello,

My husband and I have a lot of credit cards open that have zero balance on them. We bought a lot of things with zero interest finance promotions where of course they issue you a credit card. We used them only for the promotion, paid them off before interest was charged and they are now sitting there with zero balances. I would like to cancel the cards, as we will not use them again. Can you advise if this will negatively affect my credit score? I am hearing conflicting things and am unsure where to get a clear answer on this.

Thanks!

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Comments (3)

uafly1
17 years ago
I made the mistake a few years back in canceling all but one credit card. Lucky for me it was 6 months before my credit was checked again.
I was told that it not the smartest move. 1 being that I was only left with one primary card "visa, mastercard" and 2 it lowered my available credit.
I think the reducing you available credit will lower you score. But I guess if you use your credit wisely, it will bounce back pretty quickly.
kittiemom
17 years ago
DH & I also have several cards with no balance on them. We will be applying for a mortgage soon, so I asked my banker this question. He told me to cancel the majority of the cards, but to keep either a couple with fairly low limits or one card with a pretty decent limit. He said that banks like to see someone have $30,000-$40,000 worth open credit on cards (depending on your income). He says that lets them know that you have a source of available money that you can access quickly. He said they don't like to see huge amounts of open credit because that shows the potential for a problem.

We pulled our own credit reports & they said that the amount of unused credit we have may actually be hurting our score. We have only a tiny fraction owed but a lot of open credit. Another thing my banker & the credit report mentioned was the ratio of how much you owe to the amount of open credit. Example: If you owe $5,000 & have two cards with a total credit limit of $20,000, cancelling one card that has a $10,000 limit can actually hurt you. Instead of having a balance that equals one quarter of your available credit, you will now owe an amt. equal to half of your available credit.

If you want to cancel, make sure you write a letter to the credit card company & keep it & proof that you mailed it on file. Make sure to request that they note in your file that the card was cancelled at your request. Having a lender cancel your card can hurt your credit score.

If you won't be applying for a loan any time soon, you can just leave them & they will drop off of your credit report after a few years.
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Here is my 'guess' and it is just that...a guess. Concerning 2 and 3. refinanced my mortgage early in 2005 to a very good rate. This now shows as a 'new' loan, and it has not been paid down much in one year, by their way of thinking. I have about $160K in untapped equity (no HELOC or anything), in what remains If I understand you correctly, you have equity in your home, but have not applied for a HELOC on it. Right? They don't have any idea really then that you have that equity...right? Now this is just a 'thought' but you might want to pay off the car loan with some of that equity in your home, and then concentrate all your efforts toward paying off the HELOC. I imagine there will be some who will say 'NO' to doing that though. I applied and was approved for a HELOC a few years ago, but have never tapped into it. I 'thought' I might want/need it to get the driveway paved, but found another way that was interest free for a year and that was all I needed. I might add that I have no loans 'open' at this time and no revolving credit 'owed', as CC are paid off each month. My guess is that once the car loan is paid, that your score will improve significantly. In the meantime your score is a high B, which is still miles above the norm. Sue
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I have heard in the past that paying off a mortgage does cause your credit score to drop by a certain number of points after the fact- I can't remember the exact number offhand though. However, I can tell you from experience that you don't have to have large debt or a mortgage to have a high credit score. When we went to buy our first home, we hadn't carried more than $2500 in CC debt at any time and had never had a mortgage or car loan; our credit scores were 820 and 810 respectively (DH apparently got a bonus 10 points for having an old cancelled Pier 1 CC in his name- it was the only difference). FWIW, we do what myfask referenced and use a CC for all expenses and pay it in full each month. Since we put everything we can on the card, some months it can be quite high and current activity shows and affects your credit score- it may be one more thing we did right without knowing. Q
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stellar1
Original Author
17 years ago
Thanks Kittiemom!

That is what I was looking for.

Credit Scores and Open Credit Cards

Comments (3)

uafly1

kittiemom

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stellar1
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Credit Scores and Open Credit Cards

Comments (3)

uafly1

kittiemom

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