Warning! Closing credit cards you don’t use could lower your credit score.
Do You Have Unused Cards Like Jesse? Learn From His Mistake
How many credit cards do you own? Jesse had six credit cards: Alaska Air Visa, MasterCard, Sears, Home Depot, Paypal, and Target.
He read that only three credit accounts are needed to qualify for the best conventional loan. He also read that three credit cards are optimal for achieving a high credit score. So he took a look inside his wallet to see which cards he could get rid of without missing anything.
He quickly identified Sears, Home Depot, and Target as unnecessary. He almost always used his Visa for everything anyway, because he liked racking up the points for free flights.
So, he called customer service at the three store cards and instructed them to close the cards “at consumer’s request.”
Consequently, his credit score dropped by 15 points. Jesse was stunned and dismayed!
What happened?
Length of Credit History Accounts for 15% of Your Score
Jesse’s Sears and Target cards were five years old. His Home Depot card was four-and-a-half years old.
His Visa and Paypal cards were both less than two years old.
By closing out three long-standing cards, Jesse had lost points for longevity.
What Should You Do With Old Credit Cards You “Never” Use?
If you have a major credit card with a bank or credit union, you should use that for a small random purchase (grocery item, gasoline) once every quarter to keep it active and prevent the bank or credit union for shutting it down.
On the other hand, individual store cards remain open indefinitely (most of the time). Even if you don’t shop at Sears for three years, Sears keeps your credit line open in hopes that you might stop in and shop a sale.
There is no harm to your score in keeping old, unused cards open.
If you don’t want to handle the cards, cut them up, shred them, or burn them; but whatever you do, don’t call and instruct the creditor to shut them down! Keep those “long history” cards working for your credit score.
For more vital information about building A+ credit in the shortest amount of time, see here.
Thank you for reading this post. My aim is to help good folks achieve A credit and gain respect in the community.
“terminal delinquency.” At that point, the creditor may charge it off and try to collect money via their own bad debt department, or they can sell the account to a collection agency.
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credit is the opposite of freedom. When you can’t enjoy life because you’ve got creditors hounding you to pay bills, that is not freedom. When you can’t get a decent interest rate on a car loan or decent insurance premiums because of a low credit score, that is not fun.
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