Closing old credit accounts

[momee]

Does anyone have personal experience with closing unused accounts and can give me info on what you found happened after?

 

 

I've read credit scores can take a temporary drop (I'm totally fine with that) but then it rebounds after a short period of time.

 

I'm all into Dave Ramsey and getting rid of credit cards but must admit...I'm hesitating taking this step.

 

If I do so my plan is to cancel all but my two oldest accounts.

[momee]

1)How strange that I am allowing my FICO score to dictate my financial decisions.

2)TBH - I realize the problem I used to have with debt.  Now that I know I have those cards, I'm feeling like I could go to those stores and buy something.  This is off topic from my original post but just wanted to share how unhealthy debt can be...long lasting effects.

[Pawz4me]

Caveats -- I've never had a ton of credit accounts.  And I have no trouble responsibly managing credit card use.  And I think DR is dead wrong on many things.

 

But I don't close old accounts that I no longer use.  I leave them open but just don't use them.  If new cards come I cut them up.

 

My credit score is very, very close to a perfect 850.

 

I think it's very wise to consider how these things will impact your credit score.  As some previous threads have pointed out, one never knows what the future will bring (spouse's death or disability, divorce, etc.).  A healthy credit score is a very good asset to have.

[applethyme]

I have opened and closed accounts and the world did not end.  We were still able to buy a house and cars.  I keep my two oldest open but the rest are fair game. 

[momee]

IF we keep only one card open for emergencies, what would be a fair and reasonable amount on that?

 

Enough to...say...pay to have car towed, transmission fixed, and an overnight in a hotel till it's on road again?

 

I'm seriously looking for a number.  I don't see why I need a credit card when a debit will do fine.  That's two questions in one post, lol.

(hate debt, hate debt, hate debt!)

[Jean in Newcastle]

I have stellar credit

 

I have a number of credit cards.  I use them responsibly.  It hasn't affected my credit negatively (see first sentence).

 

I've closed some accounts over the years and have left some "opened" but cut up the cards themselves.  It hasn't affected my credit negatively (see first sentence again).  

[Pawz4me]

IF we keep only one card open for emergencies, what would be a fair and reasonable amount on that?

 

Enough to...say...pay to have car towed, transmission fixed, and an overnight in a hotel till it's on road again?

 

I'd say it depends on why you want the card.  Just for emergencies, and you don't really care about your credit score?  Or is getting/maintaining a good credit score important to you?

 

Part of determining your credit score is how much percentage of available credit you utilize.  The smaller the better.  So if you have a card with a $1,000 limit and you put $500 on it for an emergency you're using 50 percent of your available credit.  If you have a card with a $10,000 limit then you're only using 5 percent.  Utilizing only 5 percent of available credit looks much better to the reporting agencies than utilizing 50 percent.

 

 

 

I don't see why I need a credit card when a debit will do fine.

 

Credit cards generally have a bit more safety protections built in than debit cards.  But the really big difference is that if there is a dispute over a purchase with a credit card none of your money is tied up while the dispute is being resolved.  With a debit card it is possible that some of your money will be tied up.  The classic example is when a card is compromised and funds are taken from a checking account.  It seems to me that most of the time the banks are very good about replacing that money right away.  But there are always reports of people who've had to wait days and days to get the money put back into their account.

 

 

 

(hate debt, hate debt, hate debt!)

 

A responsibly used credit card has nothing at all to do with debt.  In fact it's quite the opposite for us.  We're on track to earn well over $1,000 on our rewards (cash back) credit cards this year.  And we've paid $0 in interest or fees.

[ksr5377]

As much as I agree with DR that having debt is a bad thing, I disagree completely with him on the FICO score.  The world uses FICO scores and rewards you for having a good one.  Unless you are in a position where there is nothing you would ever need to finance (even in cases of divorce/death etc), then you are better off having a high FICO score.  It's not just tied to debt, but to the ability to rent, security clearance, new utilities and even employment.  One of the things that is looked at in determining your score is how old some of your accounts are.  It is GOOD for your score to have long-opened accounts that are in good standing.  So if you have had a particular Visa for 15 years, keep it open, even if you never use it.  Also, as Pawz mentioned, the % of your available debt you're using is important.  I believe if you hit 50% it brings your score down, but the lower the better.  

[Jaz]

If it causes an negative emotional response when you think of the cards, then I think you should cancel them. We canceled two of ours recently so I can't speak to the FICO hit, but I can tell you how freeing it is to have them out of our house. We kept our oldest card.