Credit Scores and Open Credit Cards

stellar1May 5, 2006

Hello,

My husband and I have a lot of credit cards open that have zero balance on them. We bought a lot of things with zero interest finance promotions where of course they issue you a credit card. We used them only for the promotion, paid them off before interest was charged and they are now sitting there with zero balances. I would like to cancel the cards, as we will not use them again. Can you advise if this will negatively affect my credit score? I am hearing conflicting things and am unsure where to get a clear answer on this.

Thanks!

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uafly1

I made the mistake a few years back in canceling all but one credit card. Lucky for me it was 6 months before my credit was checked again.
I was told that it not the smartest move. 1 being that I was only left with one primary card "visa, mastercard" and 2 it lowered my available credit.
I think the reducing you available credit will lower you score. But I guess if you use your credit wisely, it will bounce back pretty quickly.

    Bookmark   May 5, 2006 at 1:58PM
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kittiemom

DH & I also have several cards with no balance on them. We will be applying for a mortgage soon, so I asked my banker this question. He told me to cancel the majority of the cards, but to keep either a couple with fairly low limits or one card with a pretty decent limit. He said that banks like to see someone have $30,000-$40,000 worth open credit on cards (depending on your income). He says that lets them know that you have a source of available money that you can access quickly. He said they don't like to see huge amounts of open credit because that shows the potential for a problem.

We pulled our own credit reports & they said that the amount of unused credit we have may actually be hurting our score. We have only a tiny fraction owed but a lot of open credit. Another thing my banker & the credit report mentioned was the ratio of how much you owe to the amount of open credit. Example: If you owe $5,000 & have two cards with a total credit limit of $20,000, cancelling one card that has a $10,000 limit can actually hurt you. Instead of having a balance that equals one quarter of your available credit, you will now owe an amt. equal to half of your available credit.

If you want to cancel, make sure you write a letter to the credit card company & keep it & proof that you mailed it on file. Make sure to request that they note in your file that the card was cancelled at your request. Having a lender cancel your card can hurt your credit score.

If you won't be applying for a loan any time soon, you can just leave them & they will drop off of your credit report after a few years.

    Bookmark   May 10, 2006 at 5:45PM
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stellar1

Thanks Kittiemom!

That is what I was looking for.

    Bookmark   May 11, 2006 at 12:04PM
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