How to cancel old and busted credit cards?

November 9, 2010 7:50 PM

Yet another credit card question...now that the credit is good, how do I ditch the old ones without damaging the good score?

Almost ten years back I started on a process of paying off all my old past-due stuff and starting creeping slowly out of the 580-range on FICO. I managed at the time to obtain a pair of high-interest credit cards with limits of $1500 each.

Fast-forward to three years ago, and I pick up a card with just over a $10K rating. Smart spending and low debt bring me to the present day with a FICO score in the 730 range, which is good. And just today, I get a thing in the mail that tells me my credit line on the $10K card is going up to almost $15K. Which is cool - I run about 3-4K a month in expenses and pay it off each month. At 15K limits, I'm well under 30% utilization which has always been my goal.

Here's the problem:

FICO's analysis thingy tells me that my score could be higher if it weren't for the low limits on the other cards.

So what do I do? If I cancel them, I take a hit. If I apply for increased lines on these cards that I don't use at all anymore, I take a hit.

I hate leaving them out there. They're un-used, but I feel like paying the annual fees on them is dumb. I'd like to boost my score into the 800-range for both a future home purchase and just because, frankly, I want it.

My score was crap for so long and I worked my ass off to get it back up. I want to keep that upward trend.

So what's the smart play?

posted by Thistledown to Work & Money (10 answers total)

The smart play is to pick some other numbers game to play.
posted by jrockway at 8:02 PM on November 9, 2010 [1 favorite]

Yeah, I think jrockway has hit the nail on the head. If you're paying fees for cards you don't need or use, ditch 'em. Don't worry so much about your FICO, which you can never understand and never really control.
posted by restless_nomad at 8:13 PM on November 9, 2010

Closing them won't actually hurt your credit score.

http://consumerist.com/2010/04/how-to-cancel-a-credit-card-without-hurting-your-credit-score.html
posted by Slinga at 8:31 PM on November 9, 2010

Yeah, don't ever pay a fee. As a person with good credit, the credit cards pay you to use their cards now.

Also, you won't get over 800 unless you are really, really old. 750 is all you need anyway.
posted by kindall at 9:03 PM on November 9, 2010

We recently bought a house. After waiting YEARS to cancel a card because of worrying about my credit score going down (it was nearly perfect and my husband's was good, too), I finally just canceled the card. I never used it. It annoyed me. I found out my score went down a whopping 10 points or something. Anyone using your credit score for something will also likely have a copy of your report, which was the case with me. Our mortgage guy was able to see that the reason my score went down was that I closed a card I never used. He was not worried about it and told me not to worry about it.

So, I would not worry a whole lot about it unless you are planning to need your score for something right now like getting financing for a car or house. In a few months, it will might be the same as it is now. And of course you can point out to anyone that the reason your score was up and then went down is because you canceled cards you never use. They can see that right on your report that cards were canceled in month/year by account holder or whatever.
posted by AllieTessKipp at 9:13 PM on November 9, 2010

I don't think the low limits on those cards are dragging you down, or that closing them will drag you down - but I do think that paying annual fees for them is a non-starter.
posted by mrs. taters at 5:48 AM on November 10, 2010

Closing them won't hurt your score. What matters much more is utilization ratios (how much of your credit you're actually using). If $15k is like 90% of your total credit exposure, closing 10% isn't going to be a problem.

Also, agree 100% with everyone else on the annual fees. Totally not worth it.
posted by kryptonik at 5:55 AM on November 10, 2010

Most credit scoring mechanisms work on a ratio of available credit versus used credit. Closing old cards with low limits will affect your FICO not a whole lot, compared to other actions such as spending large chunks of your credit in one go and then paying minimums, or attempts to expand available credit by opening new cards when your older cards are maxed.

So, I'd not worry about it and just close them, especially if you're paying annual fees.
posted by Happy Dave at 8:49 AM on November 10, 2010

Another vote to close them. Especially since they are low limit and you are paying fees on them. The hit to your credit score from closing them should actually recover in a year or a year n a few months if you maintain your proper credit / debt ration on the cards you are currently actually using.
posted by WeekendJen at 11:28 AM on November 10, 2010

I read LearnVest and this is their recommendation: Close one card a year starting with the lowest limit and working your way up until you only have the cards that you want.
I think closing more than one card at once does really hurt your credit score since it will lower the average age of your open credit lines.
posted by KB.Boston_implant.By way of NY at 11:28 AM on November 12, 2010