Credit score; closing old cards?

Rhino

My current credit rating is about ~790 (as of last year and not much has changed). I am thinking about refinancing in the next 2-3 years (depends on a lot of factors though).

I want to close my credit cards, but not sure how much this will ding my credit. Normally I won't care, but with refinancing it could change my rate.

I have a total of 11 cards. 3 of which I use.
All those cards I wish to close, most are > 10 years old (1 is brand new)

My total credit limit is about ~$50K.
My monthly credit card debt is about an average of $2K (I pay it off every month).

So, if i I close those 8 cards, my credit limit would drop to $30K and my credit history on the cards I'd keep are about 5 years.

Is this going to kill my credit score? My broker says I need to keep above 750

Thanatos

There is no question that you absolutely want to keep the oldest one.

etdragon

Agreed that the oldest card should be kept. I have a card from when I was 18 that I keep open. I bill something to it once a year and immediately pay it off, just to keep the account active.

Unfortunately I don't have much insight on exactly how closing cards will impact your credit rating. I closed one or two a few years back and it didn't seem to do anything negative to my score but they were newer cards. I'm in about the same boat as you are score wise, I fall somewhere around 800.

Essee

Given the other credit thread, I went to finally go check my credit score for the first time, and while I was doing that, I stumbled across this article on the site I used regarding closing old cards.

It pretty much boils down to "don't close your oldest card, only close cards if you're dealing with fees or crazy-high interest rates, keep at least 4-6 cards open" (of course, I suspect the interest rate bit must presume you're actually using the card, which I bet you mostly aren't).

etdragon

I think I have somewhere in the 4-6 cards range although I only use two on a regular basis. I literally put the other cards away in my fire box. They are good to have in case of an emergency I suppose.

Figgy

From what I've been told from several financial advisers (and a friend who works for the province in the field), the reason you're taking a hit on your credit rating by closing cards is mainly very temporary. You don't want to close all your cards, but you also don't want a dozen of them open because that indicates potential debt. If you're not going to be doing anything that requires a high credit score for a few years, you don't need to worry about hits to your credit rating from closing most of them out now. That ding will go away by then.

zepherin

The hit you take is because part of your credit is based on credit utilization. If you have 2 10k cards with a 5k balance on each of them. If you transfer 5k off one and close the other your credit utilization jumps from 50% to 100% same thing in your case 10 cards at 5k each, if you use 6 and close 4 the utilization is going to jump up. Which negatively impacts your credit.

etdragon

zepherin wrote:

The hit you take is because part of your credit is based on credit utilization. If you have 2 10k cards with a 5k balance on each of them. If you transfer 5k off one and close the other your credit utilization jumps from 50% to 100% same thing in your case 10 cards at 5k each, if you use 6 and close 4 the utilization is going to jump up. Which negatively impacts your credit.

Does that mean if you currently have no balance on any cards and close a few that you don't take any hit from closing them?

khain

etdragon wrote:

zepherin wrote:

The hit you take is because part of your credit is based on credit utilization. If you have 2 10k cards with a 5k balance on each of them. If you transfer 5k off one and close the other your credit utilization jumps from 50% to 100% same thing in your case 10 cards at 5k each, if you use 6 and close 4 the utilization is going to jump up. Which negatively impacts your credit.

Does that mean if you currently have no balance on any cards and close a few that you don't take any hit from closing them?

It's based on utilization, not the balance you carry so even if you pay credit cards off every month the company reports an amount that you used. I've never found any concrete source on how this amount is calculated or even if it's the same across companies, but at least from what I've heard to be safe you should take the highest amount on the card and use that. I'm not sure this second part is true, but I've also been told that if you stop using cards the impact they have on your credit score decreases over time.

zepherin

Also in terms of loan terms the difference between 760 and 850, is a big goose egg, same good terms. No advantage. Now 759 they pay more fuck them.

from http://www.lowcards.com/cscores.aspx

760-850 score 5.86% interest rate $1,275 monthly payment
700-759 score 6.08% interest rate $1,306 monthly payment
680-699 score 6.26% interest rate $1,331 monthly payment
660-679 score 6.47% interest rate $1,361 monthly payment
640-659 score 6.90% interest rate $1,423 monthly payment
620-639 score 7.45% interest rate $1,502 monthly payment