REVscene - Vancouver Automotive Forum

sonick · 11-02-2009, 07:06 AM

Just signed up for a new CC with better benefits, but I was just wondering what is better for my credit score, to keep my old one and simply not use it, or to cancel outright unused/inactive credit cards.

If all is the same, I'd rather cancel it than keep it around.

Thanks!

wendal · 11-02-2009, 01:39 PM

Is this a serious question?

To keep your credit limit higher? Just rmb to pay off your bill ON TIME, or at least the minimum payment ON TIME. I dont think having more CC will make you have better CC limits.

I would def call in to cancel your CC.
1) For your own protection.
2) If you have annual fees, you dont have to pay them anymore.
3) If someone steals your CC number they can use it.

And you should be safe than sorry. BTW it only takes couple mins to cancel your CC.

sonick · 11-02-2009, 01:54 PM

Yes it is a serious question as it is not as simple as you think, which is why I am asking. I kind of understand in general how it works, but figured somebody who may know better could chime in.

I did some reading in response to your post, and this is what I've gathered... If anybody has any information otherwise, be glad to hear it.

Canceling an old, well established credit card DOES have an adverse effect on your credit score. This is due to how they calculate the credit score, namely the debt utilization ratio, which is better if it's lower; and credit history, which is better if it's longer.

So if I canceled my card I've had for the past 4 years or so, it could adversely effect my score as it would effectively cancel out 4 years of credit history, and reduce my credit amount, thus increasing my debt utilization ratio.

Since it has no fee, I figure I should just stick it in a drawer and use it once in awhile for minor things to keep it 'active.'

!SG · 11-02-2009, 03:18 PM

keep ur old cc's even if u dont use them.

it affects ur credit, more like ur available credit.

easiest way that i understood it was, say u have 3 credit cards, all $5000 limit, and one of them you carry a balance on of say 2500.

so with that said, you have $2500 owing on a total limit of 15000 (all 3 cc's added together). doesnt all look that bad, debt ratio of 1 to 6 (17% roughly). you cancel one of the unused cc's, now u have a debt ratio of 1 to 4 (25%). doesnt look as good.

so best is to keep cc's that you do have, dont open any new ones, and just keep those cc's in a hidden place or safe or something so you dont use them.

jackmeister · 11-02-2009, 03:36 PM

i recently canceled a credit card of mine, but what i did was transfer the credit available to my other credit card from the same bank. that way it should roughly be the same thing as mentioned above.

but then again, it requires you to have the cards at the same bank.

bui95 · 11-02-2009, 06:45 PM

kept your old card if you dont have any annual fees to pay. the credit history you built on that old card cant be replaced.

just dont have more than a handful of cards, thats just silly.

95Z28 · 11-02-2009, 10:06 PM

It's best to phase out old credit cards over time because you don't want to lose the credit you have established. Before getting rid of a current card, make sure you have a couple years established on a new card, then call in to cancel. If you have any annual fees on the old card, try calling them to see about removing the fee (don't tell them you won't be using the card anymore). I've heard of this working if you have had a good credit past with them.

If you have large outstanding debt on your credit cards, it's best to spread the debt over multiple cards. It will be better for your credit score if your debt per card is less than 50% of the available credit. If you do have a large balance on your credit cards, you might want to look at opening an unsecured line of credit. Providing you have decent credit, your interest rate will be a lot lower which could potentially save you thousands a year.

Gt-R R34 · 11-03-2009, 02:42 PM

Quote:

Originally Posted by 95Z28

If you have large outstanding debt on your credit cards, it's best to spread the debt over multiple cards. It will be better for your credit score if your debt per card is less than 50% of the available credit. If you do have a large balance on your credit cards, you might want to look at opening an unsecured line of credit. Providing you have decent credit, your interest rate will be a lot lower which could potentially save you thousands a year.

BIG BIG mistake on the spreading it out over multiple cards (financial suicide.) if you have an outstanding debt on your credit cards. GET rid of it ASAP. not spread it around. Best to debt-consolidate your loans then have your cards cancelled.

It would be obvious if that a person can't control his/her finances if he or she has large debt spread over cards. You would want simple balance, 1 monthly amount, lowest amount of CC possible to get your budget in check.

Unsecured LoC - is only good if you can manage your budget, have a plan because being able to draw your LoC, it's literally like a low interest CC.

If not then the most logical suggestion your bank should make is to do a term - you pay princpal along with interest over a set amount of year. Have extra money, throw it onto the loan and make a lump sum payment to straight principal.

Back on Topic - close off cards stay on your bureau for 7 years after you close it so it still have a standing on your report score, and in 7 years time you're probably going to have other source of credit building items, not really to worry if you close the card and the debt utilization #'s.

Only thing people need to EVER worry about is payment history, that should be the major concern of any person, not 'how many or how little cards you have. What affect it would have on my score if i close cards. If you have cards you don't want, close it. Lots of ppl with 800+ beacon scores are people with 1-2 cards that they like the product or services the cards provide. Pick the cards you want, keep them, close the ones you don't want.

Keeps your payment history in good standing, keeps your budget in check and you're more or lesss going to be 720+ FICO(beacon) score.

!SG · 11-04-2009, 09:42 AM

here's a slightly off topic question.

do credit cards w/ no outstanding balance, that arent in use, close themselves after a certain duration of non activity? ive never had the situation happen before, but now its got me curious if banks or cc companies do this?

eg. you got a cc, no balance owing, you havent used in a year. does the cc company cancel it for you?

misteranswer · 11-04-2009, 10:04 AM

Quote:

Originally Posted by !SG

here's a slightly off topic question.

do credit cards w/ no outstanding balance, that arent in use, close themselves after a certain duration of non activity? ive never had the situation happen before, but now its got me curious if banks or cc companies do this?

eg. you got a cc, no balance owing, you havent used in a year. does the cc company cancel it for you?

Some will, some won't. PC Financial canceled the Mastercard I have with them after a year. TD almost pretends I don't have a Visa card with them. It was the first card I ever got and it's never had an automatic limit increase. Knowing TD, the first thing they will probably do instead is charge me an inactivity fee before canceling the card.