Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets. Ask Sally a question, or read her previous answers in the To Her Credit archive
Dear To Her Credit,
I'm just now coming out of a 19-year marriage. Fortunately, my ex and I always had excellent credit!
Now that I'm beginning anew by myself, I was wondering about all the store credit cards I have just in my name. I haven't used them in many, many years, and I do not even know if they are active. If I contact the store credit departments and close the accounts, will this affect my credit rating like closing my bank cards would?
I just want to keep the credit score I have intact. I know that credit is priceless and something that you earn over your lifetime! Thank you in advance for your insight. -- Kathryn
Credit is credit -- it doesn't matter whether it's from Bank of America or Macy's. Most of your store cards are probably issued by unaffiliated banks anyway. Target and Nordstrom are two of the best-known exceptions -- both issue cards through their own subsidiary banks -- but the current trend is for stores to use other banks to issue their cards for them.
Regardless of who owns the card-issuing bank, information about all your accounts is reported on your credit report and affects your credit ratio -- the percentage of your total available credit you have borrowed.
I'm more concerned about the fact that you seem to have more cards than you can keep tabs on. If you're like many people, you may not even be sure how many cards you have, or who else has them. I get so many letters from people who discover too late that their cards got in the wrong hands or who forgot they added someone as an authorized user or joint account holder! You can reduce your exposure to such confusion or fraud by closing excess accounts.
First, get a copy of your credit report. You are entitled to a free report from each of the three credit bureaus every year at AnnualCreditReport.com. Be wary of other websites offering free reports or credit scores, as you can easily get roped into paying for monthly service plans or other services.
When you get your report, you'll see all your accounts and the status of each. Pick two to five cards you want to keep. I'd choose my favorites based on:
Versatility. Say the sales associate at a clothing store talked you into a store card 10 years ago, and you haven't been back. I say close the account. Favor cards you can use more places so you won't need a purse full of plastic.
Length of time the account has been open. Older accounts look better on your report.
Credit limit. To avoid damage to your credit score, don't close the accounts with the most available credit, especially if you carry a significant balance on others. That could throw off your balance-to-available-credit ratio. As a general rule, close accounts with smaller credit limits first.
Low or no annual fee. Why pay an annual fee when so many cards don't have them? The exception may be a card with features that far outweigh the fee.
Interest rate. Ideally, you never carry a balance so the interest rate doesn't matter. All else being equal, however, I'd keep low interest cards.
Perks. If an airline rewards card wants to give me a free companion airline ticket every year for using its card, I'm game. Some rewards and perks are too good to pass up. Just make sure you don't try to take advantage of them all.
Customer service experience. If you ever had to call your bank and you got through quickly to a real person who actually helped you, that bank might be a keeper.
Close excess accounts the right way (Read "How to cancel a credit card" for more info on how to do that.). Don't close them all at once; allow several months to pass between closings. Remember that the risks associated with having too many cards outweigh small temporary dings to your credit score from closing them. Take care of your bigger financial picture, and you should be able to maintain and build your excellent credit just fine.
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