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To close or not to close

April 4th, 2007 at 03:28 pm

I have two credit cards that I would love to close the accounts. One I paid off yesterday, the other will be paid off as soon as DH's reimbursement check comes in. Right now between ALL of my cards I have a total limit of $51,300 (OMG!) and am carrying a balance of $11,754 which gives us an overall ratio of 22.9%. If I close these two accounts, it will reduce our credit limit to $39,500 leaving us with a ratio of 29.8%. The other thing that puts a wrinkle in this equation is that one of the cards (Wells Fargo, $7800 limit) is our second oldest card overall. The other card (American TV, $4000 limit) is only a couple months old so I will probably close that one for sure.

I am waffling because I don't know how this will affect our credit score (I assume it will be negative). On one hand we aren't planning on applying for anymore credit anytime soon, but on the other hand I don't believe in completely disregarding our credit score as irrelevant. I have been hearing more and more about how your credit score can affect everything from insurance rates to interest rates, so I want to keep it as healthy as possible.

Yes, I am probably over thinking this. I REALLY want to close the Wells Fargo account so I can be rid of this albatross once and for all. Worst customer service I have ever had and just plain miserable tactics for getting every penny out of us that they can.

Any thoughts?

12 Responses to “To close or not to close”

  1. Cheetahwoman7 Says:

    Well, I say read your own words:

    Also, it turns out my battle with Wells Fargo is going to continue for another month. DH just spent the last week in Detroit and he only had the WF card in his wallet. Which meant that food, hotel and rental car for 4 days ended up on that card. Great. Even if he puts his expense report in today, he won't get reimbursed until the next pay period (4/12) and the payment is due on the 16th. Since it takes them 5 days to clear an ACH we are going to be cutting it really close.

    AGAIN. Grrrr....I just want this card GONE! Tonight I am going to take the card out of DH's wallet and put it into the lock box. Or better yet, shred it. *insert sinister laugh here*

  2. Cheetahwoman7 Says:

    Sorry to be so direct on the other comment, but it really appears that that particular credit card causes you grief. Maybe if you posted on the forums someone could tell you how it might affect your credit score.

    Good luck with whatever you choose to do. Smile

  3. debtfreeme Says:

    i would not close the oldest until every card is paid off. you might have an emerency that would cause you to have to charge and be over the 30% ratio mix. just put them away (or shred them but keep account statements and check them monthly) but don't use them.

    Once everything is paid off then it is better to close them, but only one at a a time and wait 6 months between. i would consider the american TV one, but then again it would impact your credit ratio.

  4. HouseHopeful Says:

    As someone who looks at 100s of credit bureaus on a daily basis, I recommend not closing any accounts that are old. Once you close the account, you lose that credit reference. So if its your oldest card, it CAN have a negative effect.

    But the other question is how well do you feel that you can hold yourself accountable and not use that card. If you feel its going to be too much of a temptation, I would say go ahead and close it. Because ultimately low debt is a good thing.

  5. Ima saver Says:

    Put the cards somewhere where you will never see them again, but don't close anything. I have 15 cards, I use one and pay it off each month.

  6. scfr Says:

    Here's what Suze Orman advises in Women & Money regarding cancelling cards:

    No Annual Fee? If the card has no annual fee and you're concerned about your FICO score, don't cancel it. Just put it away someplace really secure (like your safety deposit box).

    Annual Fee? If you are paying an annual fee, you may want to cancel the card. But Suze says don't cancel more than one card per year, and start with the one that has the lowest credit limit.

  7. newlyfrugal Says:

    Thanks for the responses and the advice! I think the best course of action will be to hang onto the WF account, but make the cards inaccessible. I don't have a problem with temptation, but DH does, which is why he is only allowed to carry one card at a time. I will be closing the American acct ASAP, but that will keep our ratio under 25% and I won't plan on closing any of the other accounts until the end of the year. Thanks again!

  8. creditcardfree Says:

    I closed our last credit card account that had over 10 years of history over a year ago . When we applied for our current mortgage, we had a credit scores over 800. If you have an EF in place, I would cancel both cards, especially since you are not planning to take out any more loans in the near future. Any negative effect, will balance out with time.

  9. LuckyRobin Says:

    How old is your second oldest credit card? If it is only a year or so difference, I wouldn't have a problem with closing the Wells Fargo card, especially since it has been such a difficult one. And if you aren't going to be applying for new credit any time soon, even closing the oldest card is not as big a deal as it is often made out to be. The biggest thing is to ask the card you are cancelling to report to the credit bureaux that the account was closed at user's request, so that any future creditors can see at a glance that the accounts were closed by you. It only takes your credit score about a year to rebound after closing cards if you consistently make your payments on time and lower you debt ratio on the remainging cards.

  10. monkeymama Says:

    I have to say the one thing I don't see mentioned is what is your credit score? Is it great? Working on it? Bad?

    When you have an excellent credit score I see all of this hooha to keep open accounts as nonsense. I just closed my oldest card erasing the first 6 years of my credit history. It is such a small piece of my score it mattered little - still in the 800s. I Was really scared it would affect my score more, but then again I figured how bad could it be. In the end I find much ado about nothing. I didn't want to pay the annual fee on a card I haven't used in years - I made the right choice.

    If you have a score you are trying to improve and you need every edge you can get, then I wouldn't close them. But you have to consider and weigh all the other factors as well. Something in your current standing could be hurting you, a closed car could pay off. There is more to your score than history.

    I always have to say something when these discussions come up because logic seems to go out the window sometimes in the fear of credit score.

    Good Luck!

  11. newlyfrugal Says:

    Monkeymama - as of last week our (non-FICO) score was 748. Good, but not excellent and would like to see it better. The card in question is almost 6 years old, but we do have one other card (that we will be keeping forever) that is almost 7 years old. All the rest of them are 2 years old or less and are mostly "store" cards used for financing furniture, etc. Does that shed anymore light? And I agree that it seems illogical to keep open cards just to keep some sort of history, but I get nervous none-the-less. *sigh* Wish they could demystify this whole credit business, but then how would they make any money?

  12. Lux Living Frugalis Says:

    If you do decide to keep them open then why not ask them to lower your credit limit a bit? I'd be nervous having that much credit available for someone to identity hi-jack!

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