Does cancelling your credit cards hurt your credit rating?

October 5, 2004 11:55 AM

Does cancelling your credit cards hurt your credit rating?

I'm seriously thinking about ditching Bank of America and going USAA for my banking, and I want to cancel everything at BofA, including my two credit cards. The last time I cancelled a credit card (at Capital One), they bitched and moaned about how I was hurting my credit rating and that I should keep as much open credit as I can. That kind of smells of bullshit, but I thought it might merit a looking into. True or nothing to worry about?

posted by Hackworth to Work & Money (8 answers total)

Best answer: I don't know about *generally*, but oftentimes if you don't make sure a company makes a note in your credit record that you willingly chose to cancel the card, they'll note it as "Card cancelled" and let people assume they took it away from you.
posted by headspace at 12:04 PM on October 5, 2004

Yes to what headspace is saying: get the person who's cancelling it to add a note that says "Cancelled at cardholder's request".
posted by dobbs at 12:10 PM on October 5, 2004

It's been a million years since I last cancelled a card, but at the time a friend told me to make sure that my credit report said "cancelled at customer request" or something like that.

I don't know if it's necessary to do that; I'm just repeating the advice I received.
posted by aramaic at 12:11 PM on October 5, 2004

Response by poster: hmm, three out of three recommendations is pretty good odds, so I guess that's what I'll do. Thanks!
posted by Hackworth at 12:16 PM on October 5, 2004

Best answer: According to Fair Isaac & Co., once you acquire more than seven revolving debt accounts, your FICO score begins to suffer a little.

When you close open accounts, those credit lines are no longer factored into your ratio. Thus the percentage of debt/available credit will increase.

Removing old closed accounts that don't have any negative items is a bad idea simply because you benefit from a long credit history and those accounts speak to that credit history. (Remember, 15% of your credit score is determined by how long you've been borrowing. Here's how the rest of it is measured by The Man.)

Yet simplification is good. More on this at the Fool. When you do, like everyone else said, do it right. It doesn't take much extra work to be thorough and it's well worth it.
posted by pedantic at 12:24 PM on October 5, 2004

Remember also that you can now look at your own credit report once a year for free in many US states. You can always get one free report if you have been denied credit. I recommend everyone do this with the major credit bureaus because sometimes it's interesting to see what they do and do not know about you. Here's a list of which states are going to offer free credit reports when. This page contains contact info for the major credit agencies.
posted by jessamyn at 1:25 PM on October 5, 2004

Some of the credit reporting agencies are now offering advanced tools for analyzing your FICO score. For instance, you can get a summary explaining which factors are affecting your score, do your own scenario testing to see how closing one account vs. another affects the score, etc.
posted by nakedcodemonkey at 2:07 PM on October 5, 2004

Removing old closed accounts that don't have any negative items is a bad idea simply because you benefit from a long credit history and those accounts speak to that credit history.

Exactly. So the answer to the question is...sometimes.
posted by justgary at 2:07 PM on October 5, 2004