Comments on: Why Shouldn’t You Close a Credit Card?

By: John W

John W — Thu, 21 Dec 2006 18:49:20 +0000

Excellent article.
I am a mortgage broker & most of the lenders I deal with *ALL* want to see at least one ACTIVE credit line.
Even if you buy gum from the store once a month & pay it off each month, they don’t care. They just want to see that you have credit and use it.

So if you are in the game (looking for a loan of any sort) keep at least on card active.
If you are the type that if you have it (credit) you have to use it, fine, just reduce the available credit limit. Oh, and keep your balances below 75% of the total available.

By: John Wilks

John Wilks — Mon, 06 Nov 2006 17:43:08 +0000

I’ve also closed a credit card account when I was done paying it off. But I do see the errors of my way.

By: We’re In Debt » Day 180: The 60th Carnival of Debt Reduction

We’re In Debt » Day 180: The 60th Carnival of Debt Reduction — Mon, 06 Nov 2006 03:14:05 +0000

[...] Tricia at blogging away debt wonders why you shouldn’t close a credit card? We’ve been planning on buying a house next year, with one of those zero down mortgages (after our credit card debt is $0), and all the bankers that we have spoken with agree, that closing your credit cards is a very bad idea. The best thing to do, is cut them up and burn them. To know why, you’ll have to read Tricia’s article. [...]

By: Matt

Matt — Tue, 31 Oct 2006 21:05:35 +0000

I never thought about the effects of closing a card; this would have changed how I did a few things in the past. I guess this would explain why I was having some difficulties trying to transfer all my debt onto one card. I guess I’ll keep that second card open even if I don’t use it.

By: Golbguru

Golbguru — Tue, 31 Oct 2006 20:47:19 +0000

Good point. Most people in a haste to cut off their debt cancel cards after paying it off…or making a balance transfer from that card. That’s not good….In fact I have done that once a long time ago when I wasn’t aware about how these things work.

By: Bob

Bob — Tue, 31 Oct 2006 18:43:26 +0000

I can think of one other reason closing a credit card can impact your credit rating – one that happened to me.

I had several cards with low limits from the same company. I called up and canceled these cards. Thinking everything was OK I just went on my merry way until two months later I got an overdue notice and a $100 bill (I don’t remember the exact amount, but it was plenty). I called the company, got a rep in India (the first one that I cancelled with was from the US). I explained that I had canceled the card and there should be no charges.

Turns out this particular card had some kind of annual fee. Even though the balance was zero (and had been for some time) the annual fee was charged AFTER I had closed the account. Next month I was charged with a late fee which, of course, showed up on my credit report. The Indian sales rep was very helpful, reversed the incorrect charges and closed the accounts, but the credit card company did not bother to have the items removed from my credit report.

The moral of the story is be SURE your account is canceled and no additional fees are charged.

By: Wayne

Wayne — Tue, 31 Oct 2006 18:42:36 +0000

While I’ve heard all of the “don’t close it cause it will cause your score to go up” rational before, I also think you have to take into account your overall goals… and what a FICO really means in your life.

In my mind, your goal, in addition to getting out of debt, is to be the picture of financial health… to be that, I think one card with a reasonable credit limit and low interest rate is the most responsible… (until you can get to the point of not needing any cards ever)

Now if you’re thinking of a new mortgage in the next two years, or know you’ll be in the market for an auto loan, sure… play the FICO game. Do all you can to prop that up… but if you’re not, in the long term, fewer will be better for you.