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Closing excess cards without hurting credit score

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Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question Dear Opening Credits,
I have a lot of credit cards that are in excellent standing and also have had them for a long time. I have about four major credit cards, and the rest of them are all department stores/clothing store cards. All cards are completely paid off with zero balances except two of them, which have debt equal to about $1,300. I want to close some of these store cards and was wondering how badly it will affect my credit score. I also just applied for a Chase card that has rewards because my current Chase card was just a basic card. I will be transferring my limit to the new card, which they said it was OK to do. I'd rather have more major credit cards under my belt than department stores. Please advise on how I can go about closing these cards.   -- Donna 

Answer Dear Donna,
What a terrific position to be in! You have more cards than you require and would like to cull them down to the very best -- and then get an even better one. Fantastic! Here's how to go about doing just that without causing much of a ripple in your super-smooth credit landscape.

You're on the right track in analyzing which of your credit cards to keep active. Picture all that plastic as you would clothes in a closet. Some items are perennials you'll want to hang on to, while others are out of style and just taking up space.

So for each card, ask yourself:

  • Do I use it? Even a gorgeous sweater that you never wear is useless. Same for a credit card. If you do turn to it regularly, you're actively building your credit rating with that account and it can make sense to hold on to it. But if not, it may simply be extraneous.
  • Do I need it? If you don't shop with those retailers anymore or would rather use a general purpose card to make purchases, then the store cards are dispensable. If you keep them in your wallet, they may even spell trouble if they are lost or stolen. In that case, you'd have to remember them all and notify each creditor of the problem. So streamline. If you need the card, keep it, and if you don't, close it down.
  • Is it doing anything for me? As a longstanding cardholder with a positive history of responsible charging behind you, any credit card you have should give back in more ways than just letting you shop with it. I'm glad you applied for a card that allows you to build rewards points that you can trade in for cash or stuff.

Closing an old card will temporarily ding your credit rating as you lose that credit line, which reduces your credit utilization ratio (amount owed across all cards measured against how much total credit you have). However, your successful payment history with a closed card account will remain on your credit report for up to 10 years. You were smart to apply for a new card before you closed any old cards. Just make sure you won't be applying for any new lines of credit (think mortgage, car loan, etc.) in the near future because you'll need to allow your credit score some time to recover.

Finally, I would refrain from closing several cards at once to minimize credit score damage. Wait a few months in between. If you're not going to be loan shopping anytime soon and just want to clear out your wallet, go ahead and close away. Just know it will take time for your credit score to readjust. I can't tell you exactly how much your credit score will be affected, since each individual's credit rating is dependent upon a variety of factors specific to that person's credit history.

When you're ready to cancel, just call the creditor and let them know. Be firm, as customer reps might try to maintain the relationship, especially if you've been a good customer. Additionally, they may ask you to send a letter with your request, but they can usually handle a card cancellation over the phone.

See related: How to cancel a credit card, How FICO scores work: Credit utilization

Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.

Send your question to Erica.

Published: January 15, 2014


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