I recently retired my Home Equity loan and my final credit card debt.
I now have four credit cards but want to keep just one. I plan to
contact all four companies and go with the one with the lowest
interest rate and cancel the others.
Is there a "correct way" to cancel a credit card so that it reflects
accurately on my credit score? I have read somewhere that you must
send a letter, cut up your card and send it back, etc. Can anyone
share views on 1) whether this is a good idea and 2) if so, what is
the proper procedure?
If (ideally) you never run up a balance again that isn't paid off in the
same billing period, then the interest rate is irrelevant. You might
also want to consider customer service issues such as reward points,
availability of "virtual" card numbers for on-line shopping, etc.
I can think of only two reasons why you might want to cancel. I can
think of one good reason not to cancel: it's better to have credit
available, and not need it, than the other way around (as long as there
are no significant annual fees). A corollary to that is, if there is
ever a problem with your one card that causes it to be temporarily
frozen, it's nice to have a "backup" card available.
The two "cancel" reasons have to do with ID theft and credit scoring,
and I discount both reasons. If you keep the unused cards stored
securely somewhere, and no longer receive any statements due to zero
balance, then the odds of anyone getting the number are very small.
As for credit reporting, two issues: even if you "cancel", the account
is likely to stay on your report for a long time, maybe or maybe not
reported as "closed" (since the credit agencies are independent of the
card issuers). Second and most important, canceling cards you have had
a while I believe will LOWER your credit score.
Congratulation for getting rid of the debt. I'd write the letters to
cancel and advise that you've destroyed the cards. Quite some time ago,
I canceled a card and it was stolen in the mail, of course my letter had
my name, and there was the card, cut in half. I wasn't held liable, but
the series of calls and letters, and feeling like I was being treated
like a thief was enough for me. (Why they didn't kill the account when I
called to cancel is beyond me, they insisted I send them the card cut in
But - I'd not be so quick to cancel. A chunk of your credit score has to
do with the age of your accounts and % of unused credit. You are better
off just keeping those cards in a safe place. Unless, of course, they
carry an annual fee.
Question for the group:
I'm constantly asked to take out credit cards when
shopping in stores say such as REI or Dicks sporting
Taking such credit cards out sometimes gives steep
discounts on initial purchases
If I take such a card out and then NEVER get a balance
on it (never use it)..... will I still get a statement
each month that says I owe zero dollars?
IOW.... what happens if NEVER use it? ever
Well, you'd use it at least the once - for that initial
purchase. Supposing you paid it in full and then never
used it again, you'd probably get a statement with the
zero balance (showing your payment) and almost certainly
one statement a year.
In my experience, when I have no activity (not
necessarily a zero balance - because there's a
zero balance on the month you pay if off, but
there is activity - the crediting of the payment!),
I don't get statements from credit cards.
At a minimum, they need to mail you a privacy statement
once per year, by federal law. I'm pretty sure they
have some obligation to contact you at least once a
year about your account anyway. Anyone know the
(You should be getting yourself a copy of your
credit report at least once a year and making sure
that all the accounts considered "open" really should be!)
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
You should get the card in the mail (assuming you gave accurate
information on the application.)
I had a friend that would habitually fill out credit app. forms to get
discounts and free gifts. He would, however, never put accurate
information on the form.
Except that some credit cards will cancel your account if you don't
use it. Citibank did that to me for a card that I hadn't used for a
few years. So the question is: is it better to close your own card? Or
have it closed on you?
But why? Are we just gaming our credit scores? If we just do the basics, like
making payments on time and keeping balances low, we'll have a score that's high
enough to get any loan we can qualify for at the best available rates.
In my opinion, the ideal situation is to have two credit cards from two
different providers (just in case one card is refused at an inconvenient time)
and always, always, always pay them both off every month.
More cards is more risk of unauthorized charges and more hassle with more
statements. I know these are small things, but who needs it?
I just always get asked to take out a credit card when
buying something at a retail store...such as Dicks
sporting goods. They will give you good discounts on
merchandise for taking their card
Douglas Johnson wrote on [Thu, 20 Sep 2007 09:47:30 -0500]:
Yes, it's about optimising credit scores. 2 accounts is a very thin
credit file and will give you a lower FICO than one with 4. Average age
and total utilisation is important as well.
Even if you pay in full every month, most card issuers report the
statement balance as the utilisation of the card. So, a $1000 card with
$900 on the statement shows a very high utlisation, even if you pay in
full every month.
Cards with no charges won't get a statement.
Total credit utilisation as a percentage of total availability is also
taken into account.
FICO and credit reports are becoming more important every day, so
playing their game a little can't hurt you.
I'll repeat a post from January;
From the PBS show Frontline's "Secret History of the Credit Card" we have;
35% payment history
30% amounts owed
15% length of credit history
10% new credit
10% types of credit used
Now, keep in mind, the 'amount owed' is not just the dollars involved,
it's percent available credit on the average of your accounts.
Since 15% is the length of credit history, there's some value to keeping
older cards active, but the formula for the actual score is not public.
If a large enough group of people were willing to pay for score
retrieval, and sign up for new accounts, and cancel other accounts in a
methodical process, we'd have an answer to the specific impact.
I just accepted a zero % CC deal and put the $20K in the bank for 6
months. I will gross $450 (these was a $50 transfer fee) and net less,
of course. Now, having no need to refinance my mortgage, and no other
FICO-related concerns, I still wonder what my pre-advance score looked
like, what it is now, and how it will bounce back after the payoff in
Also, worth repeating, FICO score does not take income into account. So
there was a time when I was young and stupid, had a great FICO score,
but when it was loan time, got rejected due to an insane debt to income
This amazes me. I haven't a clue what my FICO score is, but I doubt it has
any affect on anything I do. I did happen to get a new credit card last
February, with more credit than I need, so I guess my score is OK. Now what
else? Insurance? I'm not changing insurance companies, chasing around a few
dollars here or there. If my husband I decide to borrow money (for what, I
can't imagine), we'll just go to our credit union where we've done business
for years and where they know us and we'll get the best rates they offer.
But, really, I'm not playing anybody's little game.
Elizabeth Richardson wrote on [Thu, 20 Sep 2007 16:53:14 -0500]:
Insurance rates and FICO aren't only linked when you initially get the
insurance. Your insurance gets renewed every year.
There's also employers looking over credit reports and FICO.
Not planning on taking on a lease for a house or apt anytime soon?
You can probably count the number of institutions like this on two hands
My insurance (auto) gets renewed every six months. They only checked my
credit report once, when my agent switched insurers a while back. If
they were checking at every renewal it would show up as repeated
inquiries on my credit report. This all might be subject to various
state regulations, I'm not sure.
And unfortunately, unlike when you get turned down for credit, I don't
think they have to tell you they rejected you based on credit report.
On the other hand, I suspect it's primarily financial industry jobs that
might require this, they certainly should need your permission in
advance to check your report, so at least you know about it.
Yeah, I thought this was worth ignoring. My insurance gets renewed every 6
months, but I'm pretty sure they have never checked my credit report. I've
been doing business with them for 30 years. Also, no employer will ever
check my credit report. No employer, present or future.
However, they don't need to do a credit check to get your FICO
score(s). That's separate from your credit report(s). FICO already has
the information from the credit companies, which they use to put
together the scores. There's also a new FICO product, called the
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
I don't think this is true. I think that a person's credit history is
pulled each time a score request is made. I can't find the reference
now to where I read that, so I might just be making it up...
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