Will closing a gasoline credit card significantly impact my credit history?

November 6, 2006 11:29 AM

I've been doing some general simplification of my finances, and realized that its more worthwhile for me to use a credit card which gives me cash back to purchase gas (and other daily expenses). The thing is, I've had a brand-specific gas card for six years now, just to charge monthly gas fill-ups and then pay the balance each month. If I close this credit line is there a strong chance that it will impact my credit negatively?

My primary reason for imagining that it may hurt me, would be that its one of my oldest credit accounts (still only 6 years). I'm 26, so I've only had 8 years of credit history since opening my first credit line/acct. I understand that I will be reducing my available credit, therefore my debt-to-"available credit" ratio will shift, but when I do carry balances on my cards, they are very minimal anyway.

Note: I'm not shopping for home or auto loans at the moment, this is just more of a personal curiosity.

posted by Asherah to Work & Money (9 answers total)

I have always read that closing old (positive) accounts like that can affect you in a negative way.

Why don't you go ahead and keep it open and just use it once every other month? It probably depends on how often you fill up.
posted by drstein at 11:38 AM on November 6, 2006

Is there a reason to close the account, rather than just leaving it open and getting a second credit card? If you're worried about having too much credit open, ask them to reduce your credit limit. If you're worried about spending money you don't have, cut the card up (or freeze it in a cup of water) and keep the account open without using it. But I'd say you're better off keeping the account open and then opening a new account to actually use.

If you do close it, you'll probably take a small credit hit (depending on how old your other accounts are and how much total available credit you have). But if you're not planning to make any huge purchases anytime soon, I wouldn't worry about it too much.
posted by decathecting at 11:44 AM on November 6, 2006

Significantly one way or the other? No. But I agree that it is probably best to keep it open and not use it. You don't have to use it at all for it to stay current.
posted by trevyn at 12:11 PM on November 6, 2006

The other variable it will impact is "average age of your accounts", not just your debt ratio.
posted by smackfu at 12:12 PM on November 6, 2006

It will also affect your overall "utilization" level (i.e. the ratio of your revolving credit limit vs. your total balances), which affects your FICO scores. The more available credit you have, and the less relative debt you have against that credit, the better your scores will be.

Unless you're being charged an annual fee for the card, theres no good reason to close it. People on the (required reading) Creditboards forums call such cards (as well as totally worthless credit cards such as Capital One) "sock drawer" cards. Stick em in a box, and forget about 'em.
posted by melorama at 12:24 PM on November 6, 2006

I would not make financial decisions based on worrying about credit scores. I think the obsession about credit scores is a ploy on the part of the credit agency marketers. The real determinant of credit rating is your payment history -- missed payments, late payments, defaults, etc. and the amount of debt you carry. The rest is small potatoes.
posted by JackFlash at 2:34 PM on November 6, 2006

If it's one of your oldest accounts, you should not close it. Leave it open and just use it once a year or so to make certain they don't close it for lack of activity.
posted by raf at 2:44 PM on November 6, 2006

Does the card/account appear on your credit reports? If no, it doesn't matter. If yes, see above.
posted by powpow at 8:09 PM on November 6, 2006

Closing it isn't likely to make a huge difference in your FICO, because average age of accounts makes up a relatively small part of your credit history, provided your average age after closing is still >2 years. Likewise, if the available credit on that card is less than ~20% of all your open credit lines, closing it won't affect your score much either. However, having it open certainly won't hurt your score, so unless you're worried about fraud of some sort involving that card, I wouldn't close it.
posted by Mr. Gunn at 9:23 AM on November 7, 2006