Closing Credit Card will hurt credit?

[Contrariety]

Sage mamas, I need some advice. 

DH and I have finally set our sights on purchasing our first home.  We are still a few years off from it, as DH has to finish school and we'd like to pay off some debt before getting serious about saving for  a home.  I have good credit.  I have never made a late payment, ever on any account.  I want to maintain a good score so that we can qualify for a good rate on a home loan in a few years.  I have a credit card with a $10,500 limit with no current balance. I haven't used the card in over a year and never, ever want to use it ever again.  I want to close the account, but have heard that closing accounts can ding your credit score.  Is this so?  Will it matter that I wouldn't need to use my credit for a few years?  It is a long-ish standing account.  I opened it around 2002, probably.  I think the highest the balance ever got was probably around 7-8k about 5 years back. I have one other credit card that we use occasionally, which I plan to keep. Should I close it?

Thoughts?  Advice?

[Imakcerka]

Not necessarily.  When we bought out house we went through each and every item with out broker.  He asked questions about the accounts we closed and we answered honestly.  I had some accounts that had late payments of 10 days at a time... (really?)  Didn't know they could do that but they did and of course I answered honestly about that as well.  They really looked at our income to debt ratio and at that time we had very little debt and a lot of income.  Faithfully paying any we had.  I was also only 22 at the time and DH was 27.  I actually had better credit if you can believe that.  It was interesting to go through it all with him and he was really open and honest about what every item meant.  He did say that credit cards left open and unused would eventually be closed anyway and he said that honestly it's not a big deal but for us it is best to close them.  If you're not using them you don't pay attention to them and that could be dangerous as well with identity theft. 

Just some things to think about. 

[Contrariety]

I totally hate having such a high credit limit card not being watched constantly!  I try to check on it once a month, but sometimes I don't remember.  It really feels like a liability, and thats why I want to close it.  I have made financial amends and there is no reason I would ever need to use that much credit.  DH and I both have a card each with a $1500 limit and we'll keep those, not that we plan on using them, but as our emergency savings is in an account that can take a day or two to transfer, it's nice to be able to use something immediately if needed.

By the time we are ready to actually buy a house, we should have just a little debt. for sure under 20k, (probably far less, actually) in student loans and a bit of a a car payment, that's all. 

I wish credit scores were easier to understand! 

[MonarchMom]

From what I understand, the formulas used to gauge your credit score look at both the length of credit history (in which case a long standing card is an asset) and also your debt to credit ratio.  So having a card with high limit, and nothing on it, increases your score.  Closing it will lower the ratio and could hurt your score. 

I don't know how long this will effect things, but if you feel you must close this card then the sooner the better.  That way you can review your score in a few months and see if there has been an adverse effect.

I have one CC since 1990.  I use it once a year just to keep it active on my credit reports.

[cameragirl]

Closing a card usually will make a score dip some for a short time, but the score will go back up. You'll take less of a hit if the account is marked that you closed the account instead of being marked as if the credit card company closed the account. When we bought a condo, we went through each and every mark on our credit records. Some accounts were marked as closed by the company, even though I called and requested to close the cards. (Store cards, iirc.) If you're not buying immediately and have some time while you look, I'd close the account and not worry about it. If you need to buy right away, I'd hold off until after closing to close the account. It has been a long time since I worked with credit reports, but I believe the dip that you see generally is resolved within 3 months or so with a good score.

[greencrunchymom]

If that's the only type of credit you have I would leave it open.  If you are concerned about the high limit, you can usually call the credit card company and they will lower it.  Of course, if you're not looking to buy within the next 6 months or so and are dead set on closing it, I probably would.

[Imakcerka]

Certain credit companies will not lower your limit.  Some will, but most times cards are lowered due to fault of the card holder.  As in they are no longer trusted with that much of a line.  Once you close those cards and later by your house... don't worry about credit.  I had card offers coming out of my rear end and one of my cards limits got upped to 20k.  That's ridiculous.  I caught it within in a week of it happening and had them drop it.  I also sent them a letter asking them not to note the increase and decrease as it was without my knowledge. 
 

Back to cards not lowering your limit.  It took me a year and many threats to get Capital One... (biggest assholes around) to lower my limit.  And it reflected poorly on me for awhile until I got it fixed.

Originally Posted by greencrunchymom 

If that's the only type of credit you have I would leave it open.  If you are concerned about the high limit, you can usually call the credit card company and they will lower it.  Of course, if you're not looking to buy within the next 6 months or so and are dead set on closing it, I probably would.

[Contrariety]

I do have other forms of credit.  I have student loans and a car loan.  I had other cards in college but those accounts are all closed by now.  I am not planning to buy a house for at the very soonest 18 mos, and more realistically, it will be 2-3 years, so I will have time to baby my credit score if needs be, not that I think it's necessary. I have really good credit.  I don't know.  If it won't hurt it too much, and the ding is only temporary, maybe I will just close it.  It's with Citibank, and I so do not like that company.  I can't wait until we have a house and don't have to think about credit scores any more, I would so love to be one of those people without a credit score!

[Imakcerka]

Eh, I stopped caring about my credit score when a friend of mine who is jobless and living with his mother bought a new mercedez, no cosigner... no job... and his credit score was crap.  How it happened I do not know but even his mother was slamming her head repeatedly into the wall over that one!
 

Originally Posted by Contrariety 

I do have other forms of credit.  I have student loans and a car loan.  I had other cards in college but those accounts are all closed by now.  I am not planning to buy a house for at the very soonest 18 mos, and more realistically, it will be 2-3 years, so I will have time to baby my credit score if needs be, not that I think it's necessary. I have really good credit.  I don't know.  If it won't hurt it too much, and the ding is only temporary, maybe I will just close it.  It's with Citibank, and I so do not like that company.  I can't wait until we have a house and don't have to think about credit scores any more, I would so love to be one of those people without a credit score!

[EmsMom]

Originally Posted by Imakcerka 

Eh, I stopped caring about my credit score when a friend of mine who is jobless and living with his mother bought a new mercedez, no cosigner... no job... and his credit score was crap.  How it happened I do not know but even his mother was slamming her head repeatedly into the wall over that one!
 

Just have to say that this isn't the best reason to ignore your credit score.  There will always be companies to take advantage of a fool with bad credit.  Just jack up the interest rate to, what 24%, when the rest of us are paying 6 or 7% for a car loan.  There are times in life when a person might need to actually have access to some credit.  Why not at least try to keep a decent credit score?  Not to mention that it is often checked for employment and/or rental housing.  And for the OP, my understanding is that the length of credit history is an important part of a credit score, as is the debt to limit ratio.  Both of things mean that closing your account might lower your score.  If you have another card you have had for many years, or other available credit cards with a decent size limit, it shouldn't be a big problem.  If you want to hang on to it, you don't have to use it - ever. Just lock it up in your safe deposit box or something. 

[SweetSilver]

It sounds as though you are very disciplined with your money.  In that case, I would keep the card open with an eye toward your credit score.  If it was an issue of overspending (even if you pay in full each month) I might be tempted to close a card, since using a card can encourage you to spend more than you would have otherwise.  But if it's not a matter of discipline, which would trump a credit score any day in my book, then keep it open.

[Imakcerka]

I wouldn't mess my credit up on purpose.  Quite a few people don't.  For me I do have to have a decent credit score because of my job.  That being said my complete honesty is more important than my credit score.  I could destroy my credit, walk into my security officer and tell them what happened.  The thing that gets most people in trouble is trying to hide it.  If you are not hiding your financial issues you have a better chance when it comes to jobs and housing.  Living within in your means is a very important step.  While I get a lot of people think a great Credit Score puts you up there on the totem pole it's not the end all be all.  While some people are using that Credit to fund a needed car and a home... others are getting some awesome T.V.s, clothes, and other useless toys.  I got my cars and I got my house on decent Credit.  The rest is in cash. 

Quote:

Originally Posted by EmsMom 

Just have to say that this isn't the best reason to ignore your credit score.  There will always be companies to take advantage of a fool with bad credit.  Just jack up the interest rate to, what 24%, when the rest of us are paying 6 or 7% for a car loan.  There are times in life when a person might need to actually have access to some credit.  Why not at least try to keep a decent credit score?  Not to mention that it is often checked for employment and/or rental housing.  And for the OP, my understanding is that the length of credit history is an important part of a credit score, as is the debt to limit ratio.  Both of things mean that closing your account might lower your score.  If you have another card you have had for many years, or other available credit cards with a decent size limit, it shouldn't be a big problem.  If you want to hang on to it, you don't have to use it - ever. Just lock it up in your safe deposit box or something. 

Edited by Imakcerka - 2/16/12 at 7:32am

[AbbyGrant]

Originally Posted by cameragirl 

Some accounts were marked as closed by the company, even though I called and requested to close the cards.

Whenever I've cancelled a card, I've always asked for a letter from the company stating that I closed the account, and they've always obliged. Luckily, it's always shown up on my credit report as "account closed by cardholder" or something to that effect.

OP, if I were in your shoes, I would just close the account.  It seems like it's weighing on you, and I doubt it's worth it the stress. I've cancelled several cards over the years and never noticed any adverse affect on my credit score.  

It sounds like you're responsible, so I can't imagine that closing an account that's in good standing will in any way affect your ability to purchase a home in a few years. I think banks are looking at the big picture now more than ever and might even appreciate the fact that you don't have a lot of available credit. I know a friend who was told by a lender to cancel some of her cards before her home loan could be approved because according to them she had too much available credit. Now of course she could have just gone out and obtained new cards after she got the loan, but I guess it just made the bank feel better.  

[EmsMom]

Originally Posted by Imakcerka 

I wouldn't mess my credit up on purpose.  Quite a few people don't.  For me I do have to have a decent credit score because of my job.  That being said my complete honesty is more important than my credit score.  I could destroy my credit, walk into my security officer and tell them what happened.  The thing that gets most people in trouble is trying to hide it.  If you are not hiding your financial issues you have a better chance when it comes to jobs and housing.  Living within in your means is a very important step.  While I get a lot of people think a great Credit Score puts you up there on the totem pole it's not the end all be all.  While some people are using that Credit to fund a needed car and a home... others are getting some awesome T.V.s, clothes, and other useless toys.  I got my cars and I got my house on decent Credit.  The rest is in cash. 

Cannot say I disagree completely that it is a totally ridiculous way to judge someone.  Kind of like standardized testing for grown-ups.  But I would coach my kids how to achieve high scores on those tests (even though they are stupid) because that kind of achievement does matter to a small degree (like getting into honors classes, etc).  I also teach that they are a ridiculous game, not really that much different then leveling up in a computer game, really.  Same goes for a credit score.  You may never need it or want to use it.  But it still "counts" in some arenas.  So you may as well make it count for you rather than against you...
 

[basilico]

I may have this wrong but I think a few years ago DH called our credit card company and asked them to put something on our account where they would be alerted if the card was used.  We would have to call in to let them know we would be using it or had used it or something.  Maybe that is something to look into to put your mind at ease a bit.

[TiredX2]

I don't know how accurate it is, but you can play around with various possibilities at Credit Karma:

https://www.creditkarma.com/

They will show you your approximate credit score and then you can see the effects of various actions (opening a new card, closing your oldest card, going to collections on one item, paying off credit card debt, etc...).

The only hit our credit has ever taken was me closing my  oldest card.  We never used it and I figured I didn't need the few points it would decrease by closing it.  It actually fell further than I would have predicted but we still have excellent scores and we haven't needed any credit.  Both DP & I have a few cards that we buy something on at least once a year to keep active so the proportion of our used credit to our available credit stays very low (we pay our cards off every month but when they check your cards you may have a balance on them--- we spend $2-4K/month on cards so it can, at any one time, look like we carry a balance).