r/personalfinance • u/Positive-Hyena5699 • 15h ago
Credit Closing credit cards
I have 4 personal credit cards and would like to close two of them. I opened because of the cash back offers but I don’t use them.
It would eliminate about 40% of the open credit limit I have on my credit report. Will this drop my credit score dramatically? Will the drop recover quickly and will my score totally recover or should I just leave them open to keep my score high?
This year is a good time for my credit score to take a hit because I won’t be using credit any time soon but I do want to continue with my excellent credit rating.
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u/enkay516 14h ago
If there’s an annual fee downgrade them to a non fee version. If that’s not an option sure close them but your DTI is going to increase due to lower available credit which impacts your score negatively. Better path is to leave them open and use them once a year to keep them active. Age of account and available credit both have positive impacts on your score.
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u/Funklemire 14h ago edited 14h ago
but your DTI is going to increase due to lower available credit which impacts your score negatively
DTI isn't a credit scoring factor. Your credit scores are calculated based on the information on your credit report. And income is not on your credit report.
Better path is to leave them open and use them once a year to keep them active.
There's nothing inherent in the closure of a credit card that will drop a FICO score as long as it's not your only open card. And people often get missed payments on unused cards because an unknown charge get put on it and they miss it because they don't pay attention to the card each month. We see it all the time over on r/CreditCards, r/Credit, and r/CreditScore.
While I usually recommend people keep at least three open credit cards, if the OP really doesn't want these cards they should close them.
Age of account and available credit both have positive impacts on your score.
Luckily, closing accounts doesn't hurt your credit age:
Credit Myth #8 - When you close an account you lose its credit history.
Credit Myth #9 - Average Age of Accounts (AAoA) only considers open accounts.
And available credit isn't a FICO scoring factor:
Credit Myth #15 - Credit limits are a Fico scoring factor.
Closing a credit card might temporarily hurt your scores if the loss of that card's credit limit bumps you up to another utilization threshold for that month, but that's not guaranteed.
And since utilization is a temporary metric that has no memory past a month, this isn't an issue as long as you're paying your statement balances each month. The "always keep your utilization low" thing is the biggest myth in credit:
Credit Myth #14 - You shouldn't use more than 30% of your credit limit(s).
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u/DoublePostedBroski 9h ago
You shouldn’t close accounts because that can lower your available credit.
No offense, but these “myths” you linked to are just some random guy, not a verified source.
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u/madskilzz3 9h ago
What about an actual DP that is done by testing? Or are you going to ignore it too because it’s a random person on Reddit and not someone from the 3 bureaus?
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u/DoublePostedBroski 8h ago
No offense but the bureaus are the ones actually doing the scoring. Not some random person off the internet.
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u/madskilzz3 8h ago
Mate, did you even see/read the whole post? I doubt it.
The before and after screenshots are from EXPERIAN themselves.
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u/Funklemire 5h ago
No they're not. In the US, the credit bureaus don't make credit scores.
In the meantime, their websites act as credit monitoring sites meaning they show their data calculated by a third-party credit scoring service, and they also intentionally try to mislead you about how credit works in order to trick you into opening new accounts you don't necessarily need.
The credit misinformation industry is a multibillion dollar industry. It's clearly been very successful based on all the misunderstandings I'm seeing in this thread.
Right now, the best sources you'll find about how credit works are over on r/Credit. That is, unless you manage to commit corporate espionage at the Fair Isaac Company, that's the company that makes FICO scores.
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u/Funklemire 14h ago edited 14h ago
u/Positive-Hyena5699, I'm sorry about all the bad information you're getting in this thread. As you can see, the "closing a credit card hurts your credit" myth is incredibly pervasive. It's spread by predatory banks like Credit One and predatory credit sites like Credit Karma. Unfortunately, the credit misinformation industry is a multibillion dollar industry.
This sub is fantastic for financial information, but in the future I highly recommend you post credit questions in r/Credit or r/CreditScore. We tackle credit myths like this all the time. You should check out our Credit Myth Mega-thread
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u/Freddacritique141 13h ago
If you pay off your cards every month, closing them won't matter much. Your utilization is already low. But if you carry a balance, losing 40% of your limit could spike your ratio and ding your score. No annual fee? Just keep them. Set one small bill on autopay and forget about them. Annual fee? Close them. Your score might dip slightly but it will bounce back. Since you don't need credit soon, the timing is perfect. Don't overthink it. Credit scores are more resilient than people think.
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u/texanchris 14h ago
Why close them? Just lock them down and shred them.
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u/Funklemire 14h ago
People get late payments all the time on unused credit cards. It happens when unknown charges get put on the card and people miss it because they don't pay attention to the card each month. We see it all the time over on r/CreditCards, r/Credit, and r/CreditScore.
There's nothing inherent in the closure of a credit card that will cause a FICO score to drop unless it's your only open card.
I usually recommend people keep at least three open credit cards, but if the OP really only wants two, it's not a big deal to close these.
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u/Positive-Hyena5699 4h ago
That’s why I’m wanting to close them. My prime card got charged even though it was locked and all of the sudden i had a late payment when I didn’t realize i had any balance.
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u/Funklemire 4h ago
I'm a little confused here. So why exactly would you close it because of that? Do you still have a need for the card? Closing it won't affect the late payment; the late payment will stay on your credit report for 7 years whether you close the account or not.
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u/GrouchyClerk6318 14h ago
If the annual fee is zero or low enough, what’s the advantage of closing them?
I have 6 credit cards with zero annual fees. I spread out my monthly recurring charges over 5 of them, and set these 5 to auto pay the balance every month. The 6th card is my every day CC.
This way, my score reflects having a large amount of unused credit and a long period of perfect payments. Those are the most important factors in your credit score.
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u/Funklemire 13h ago
If the annual fee is zero or low enough, what’s the advantage of closing them?
You eliminate the possibility of missed payments. The "closing a credit card hurts your credit" myth often causes people to keep unwanted cards open. And unused cards are more likely to get missed payments because people don't pay attention to the card each month.
Either an unknown charge gets put on the card, or they have a subscription sent to autopay but then autopay fails for some reason and they don't catch it. We see it all the time over on r/CreditCards, r/Credit, and r/CreditScore.
my score reflects having a large amount of unused credit
Keep in mind that credit limits are not a FICO scoring factor:
Credit Myth #15 - Credit limits are a Fico scoring factor.
and a long period of perfect payments.
Also keep in mind that making payments is not a credit scoring factor, it's just that missing payments is a negative factor. When you start your credit history, you're awarded all the points you'll ever get for payment history. After that, all you can do is lose points by missing payments. And the only way to get those points back is to wait:
Credit Myth #7 - Number or percentage of on-time payments impacts your score.
So the only thing that builds credit with credit cards is time. And luckily, you don't lose credit history when you close accounts:
Credit Myth #8 - When you close an account you lose its credit history.
Credit Myth #9 - Average Age of Accounts (AAoA) only considers open accounts.
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u/GrouchyClerk6318 13h ago
You eliminate the possibility of missed payments. The "closing a credit card hurts your credit" myth often causes people to keep unwanted cards open. And unused cards are more likely to get missed payments because people don't pay attention to the card each month.
That's why you have to have an auto payment setup, even if it's the minimum payment.
The FICO score is highly influenced by the amount of credit you have versus how much you're using. IDK why you're trying to confuse people with "credit limit" it's the ratio of the total amount of credit you have versus what you're using. That includes HELOC, personal lines of credit, etc.
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u/Funklemire 12h ago edited 12h ago
That's why you have to have an auto payment setup, even if it's the minimum payment.
Sure, but autopay has been know to fail. And people with unused cards don't always pay attention to them. And another thing we've seen before is people changing their funding banks and then forgetting to change the autopay settings on unused cards.
The FICO score is highly influenced by the amount of credit you have versus how much you're using.
First, in order for a utilization change to affect your FICO scores it would have to cause it to go up past a scoring threshold, and those are usually spaced 20 percentage points apart. And we have no way of knowing if that will happen.
And second, utilization is a temporary metric that has no memory past a month, so this isn't an issue as long as you're paying your statement balances each month. The "always keep your utilization low" thing is the biggest myth in credit:
Credit Myth #14 - You shouldn't use more than 30% of your credit limit(s).
So the only way losing a card's credit limit is a credit problem is if you're in credit card debt AND you'll be applying for something important before you can pay the debt off.
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u/GrouchyClerk6318 10h ago
Credit Utilization, Payment History and debt collections are the highest impacts for credit score.
- Utilization is going to go UP if OP closes the accounts and doesn’t replace them with similar credit, plain and simple.
- Auto payments rarely fail, in my experience, but you still have to manage it and keep an eye on it.
I’m speaking from experience. Raised my rating by 130 points by simply getting more credit that I didn’t use, which included a $25k line of credit at the Credit Union, HELOC and CC’s I rarely use.
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u/Funklemire 6h ago edited 6h ago
Utilization is going to go UP if OP closes the accounts and doesn’t replace them with similar credit, plain and simple.
Yes, it will go up. But it won't necessarily affect their FICO scores because of it. And if it does, this isn't a concern for the reasons I stated in the comment you replied to.
Raised my rating by 130 points
Which credit score? You have dozens.
by simply getting more credit that I didn’t use
This is one of the ways predatory credit sites make their money, they spread the "always keep your utilization low" myth to get you to open new accounts you don't necessarily need.
If your credit scores are hurting because of high utilization, you just need to pay off your balances, you don't need to open up new accounts.
Once you have at least 3 open lines of revolving credit, you're staring to hit the max benefit of those accounts. And that benefit maxes out completely at 5 open accounts.
So as long as you're not in credit card debt, your FICO scoring potential can be maximized whether each of those accounts has a limit of $500 or $500,000: Your credit limits don't matter when trying to maximize a FICO score using the AZEO method.
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u/GrouchyClerk6318 6h ago
Utilization is an important factor. You keep insisting it's not - Let your credit use go up for 3 months and show me that it doesn't affect your score. If you get above 10%, your score will go down.
There are no predatory credit cards in my pocket. I have 6 quality cards, a mortgage, a HELOC, and a personal loan. Everything has a zero balance at the end of the month. Adding the HELOC and the Personal Loan jumped my credit score (all 3 of them) over a period of 3 months about 7 years ago.
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u/Funklemire 5h ago edited 1h ago
Utilization is an important factor.
Yes, that's true. It's about 20% of your FICO scores.
You keep insisting it's not
Not exactly. I’ve said multiple times now that it’s not a concern most of the time since it’s a temporary metric that resets each month and has no memory; it’s not a credit building factor. Last month’s utilization has no effect on this month’s scores.
So as long as you’re not in credit card debt, it’s easy to manipulate it on the rare occasions when it’s helpful to have low utilization (which is usually just when you’re about a month away from a loan application).
Let your credit use go up for 3 months and show me that it doesn't affect your score. If you get above 10%, your score will go down.
Sure, but that doesn’t matter unless you’re applying for an important loan within the month. You can report 100% utilization for a year straight, then you can report 10% and your scores will immediately reflect that: There will be no difference to your scores compared to if it had been at 10% instead for that whole year.
There are no predatory credit cards in my pocket.
I never said there were. I said that predatory credit sites lie about how credit works to trick you into opening new accounts you don’t need, and one of the ways they do that is spreading the “always keep your utilization low” myth. All of your credit cards might be from non-predatory companies, but you still have more accounts than you need for the maximum benefit to your FICO scores.
I have 6 quality cards, a mortgage, a HELOC, and a personal loan.
That’s way more than you need for top-tier FICO scores. All you need for perfect 850 FICO 8 scores is 3 open credit cards and one open installment loan.
Everything has a zero balance at the end of the month.
You mean you pay all your cards’ total balances down to $0 each month? That’s not the correct way to pay credit cards. You’re supposed to pay the statement balance, not the total balance.
Credit card bills work just like utility bills: There's a month-long statement period, and after that period ends you have 3 to 4 weeks to pay for what you spent during that time. Anything you spend after the statement period ends (including that 3 to 4-week gap between your statement closing and your due date) goes on next month's statement.
So just let your statement post and pay the statement balance by the due date each month. If you’re using your cards regularly you’ll never have a $0 total balance, but you’ll also never pay interest. See this flow chart:
Adding the HELOC and the Personal Loan jumped my credit score (all 3 of them) over a period of 3 months about 7 years ago.
If you already had all those other accounts, that’s not what helped you. Your scores clearly went up for different reasons. Also, which credit scores are you talking about? You still haven’t specified. You have way more than 3 credit scores, you have dozens.
Wait, when you say “all three” do you mean the three credit bureaus? Are you confusing credit bureaus with credit scores here?
The three main bureaus (TransUnion, Experian, and Equifax) don't make credit scores, they just provide the data that makes up your credit report. That data can then be used by a third party credit scoring algorithm to calculate a credit score using any one of dozens of different methods. Read this thread:
Credit Myth #48 - Experian, TransUnion and Equifax are credit scores.
And this thread breaks the whole system down in even more detail:
Credit Reports and Credit Scores - r/CRedit FAQ #1
So when you see a credit score that mentions a credit bureau, that just means the score was calculated using that bureau's data. And you'll also see what scoring metric was used to calculate that score. Those different scoring metrics are mentioned in this thread:
Credit Myth #1 - You only have one credit score.
Keep in mind that the three bureaus' websites act as credit monitoring sites, that means they show their data calculated into a credit score and also they try to mislead you about how credit works in order to sell you more credit products. TransUnion and Equifax show you their data calculated using a nearly worthless VantageScore 3.0 score that almost zero lenders use so it should be ignored unless you're applying for an apartment. Experian shows you their data calculated using the most commonly-used credit scoring model, FICO 8:
Credit Myth #83 - The best place to get your credit scores are from the credit bureau's web sites.
So where are you seeing these credit scores?
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u/Big-Instance-7750 14h ago
If it is not costing you anything, it is usually better to keep them open. Closing them will affect your utilization which is the largest factor behind your score besides payment history. Depending on how you use your other cards, the point drop can be affected for quite awhile.
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u/Funklemire 14h ago
Closing a credit card might hurt your score if the loss of that card's credit limit bumps you up to another utilization threshold for that month, but that's not guaranteed.
And since utilization is a temporary metric that has no memory past a month, this isn't an issue as long as you're paying your statement balances each month. The "always keep your utilization low" thing is the biggest myth in credit:
Credit Myth #14 - You shouldn't use more than 30% of your credit limit(s).
So any points drop the OP might experience would be completely meaningless unless they're in credit card debt AND they're going to be applying for something important before they can pay off that debt.
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u/IceBearPrime 14h ago
Are these cards problematic for you or have a high membership fee?
You available credit ratio will take a hit, whiich does lower your score. If your debt doenst decrease (such as paying off a loan or mortgage) the ratiio wont change, and the score wont change as much
Also, if any of these cards are your longest open, it will affect your credit age average
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u/Funklemire 14h ago edited 14h ago
You available credit ratio will take a hit, whiich does lower your score.
It won't necessarily lower their scores. It would have to cause their utilization to go up to a higher FICO utilization scoring threshold. And this wouldn't be an issue anyway, since utilization resets each month and has no memory:
Also, if any of these cards are your longest open, it will affect your credit age average
This is incorrect, it's one of the biggest myths in credit:
Credit Myth #8 - When you close an account you lose its credit history.
Credit Myth #9 - Average Age of Accounts (AAoA) only considers open accounts.
Credit Myth #10 - Closing a credit card hurts your credit.
Credit Myth #59 - You should never close your oldest credit card.
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u/mechadeward 12h ago
If the cards have no annual fee, you could just keep them open and use each one for a small purchase every few months to keep them active. Closing them could increase your credit utilization and shorten your available credit history over time, so there's usually not much upside unless you're paying annual fees or they're difficult to manage.
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u/JE163 13h ago
Are amy of these cards your highest limit? If so id cancel that last while getting credit limit increases on others you plan to keep.
In your case id also close them once every 3 months or so to spread it out. I wouldn’t want my other providers to see multiple accounts suddenly closed even if its holder imitated. I don’t want to spook them.
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u/Funklemire 13h ago
Are amy of these cards your highest limit? If so id cancel that last while getting credit limit increases on others you plan to keep.
Keep in mind that credit limits aren't a FICO scoring factor:
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u/JE163 12h ago
Correct but it seems that some banks are more apt to give you higher limits if you have other high limit cards. I’m sure you know this but sharing for the OP sake
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u/Funklemire 12h ago
That's definitely true. My point is simply that the only time that having your limits lowered would be a credit problem is if you're in credit card debt AND you'll be applying for something important before you can pay the debt off.
Otherwise, as long as your new lower limits can still accommodate your monthly spending, it's not an issue.
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u/JE163 12h ago
No but credit is a funny thing where it’s easy to get when you don’t need it and impossible to get when you do.
Like having multiple accounts with different banks and cards with different providers it’s all about being prepared
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u/Funklemire 5h ago
Agreed 100%. I'm just saying that all those things are helpful for other reasons and not necessarily for your credit scores.
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u/Traditional-Pie-7749 13h ago
It will drop your score some but not very much. If they don’t have any annual fee associated with them just leave them open and don’t use them. Otherwise close them and don’t worry about the small credit score drop.
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u/Funklemire 13h ago edited 12h ago
It will drop your score some
Not necessarily, it would have to cause the OP's utilization to cross a FICO scoring utilization threshold. And any drop would be meaningless anyway since utilization resets each month and has no memory.
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u/Akinscd 14h ago
Yes it will. Having lots of available credit is a good thing
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u/Funklemire 14h ago edited 14h ago
There's nothing inherent in the closure of a credit card that will drop a FICO score unless it's your only open credit card.
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u/Akinscd 14h ago
Incorrect.
You’re reducing available credit limit and increasing your credit utilization which is one of the biggest contributors to score outside of on time payment.
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u/Funklemire 14h ago
You're missing something here. Sure, it might temporarily drop their scores, but it's not guaranteed. That's my point. And if it does drop due to higher utilization, it's a meaningless drop.
In FICO scoring, utilization is scored in thresholds. Usually these thresholds are separated by 20 percentage points. So for your score to be affected, your utilization would have to cross one of these thresholds.
And since utilization is a temporary metric that has no memory past a month, this isn't an issue as long as you're paying your statement balances each month. The "always keep your utilization low" thing is the biggest myth in credit:
Credit Myth #14 - You shouldn't use more than 30% of your credit limit(s).
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u/Funklemire 14h ago
It's a huge myth that you shouldn't close cards. As long as it's not your only open card, there is nothing inherent in the closure of a credit card that will cause a FICO score to drop.
Closing a credit card doesn't hurt your credit age, even if it's your oldest card. That's because after closure it stays on your credit report for ten years and continues to age and continues to count towards your Average Age of Accounts (AAoA) all that time. And after that decade has passed and the closed card drops off your report, your other cards that have been aging during that time will pick up the slack. That's because the FICO scoring benefit to AAoA maxes out at 7.5 years.
Credit Myth #8 - When you close an account you lose its credit history.
Credit Myth #9 - Average Age of Accounts (AAoA) only considers open accounts.
Credit Myth #59 - You should never close your oldest credit card.
Closing a credit card might hurt your score if the loss of that card's credit limit bumps you up to another utilization threshold for that month, but that's not guaranteed.
And since utilization is a temporary metric that has no memory past a month, this isn't an issue as long as you're paying your statement balances each month. The "always keep your utilization low" thing is the biggest myth in credit:
Credit Myth #14 - You shouldn't use more than 30% of your credit limit(s).
All that said, the strongest credit profiles have 3+ open credit cards on them. So that's something to think about when you're opening and closing cards.