Any harm in closing my only 2 cards?

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Any harm in closing my only 2 cards?

Postby shoptalk01 » Tue Oct 23, 2012 2:15 am

I know this might sound stupid, but I've had a 2 secured cards for a couple of months now, but they aren't doing a thing for my credit score and if anything it's went down slightly. Would there really be any harm in just cancelling them?

It's been really difficult for me getting along with my low credit limits, even trying to up one of the limits, I just don't have the funds to tie up right now to put my limits to where I need them. Really all these cards are good for is making 2 small purchases each month 1 on each card and that's it. Once you make a small purchase and your balance reports, using the card for daily purchases does no more good then charging $10 every 3 months to show activity on the account. Just the idea of having $800 tied up with Capital One and being told that I can't spend more than $200 using my card just plain has me bummed. I found a local credit union but they suggest if I want another credit card that I come back in 6 months after things start to settle down from all the inquiries that I've had, then they suggest something like a loan over a credit card since I already have 2 and adding one more right now will do very little to help. After doing more research, I kinda feel that I would like to dump Capital One and get my money back -- so what if they want to offer me an unsecured platinum with a $500 limit in a year? There just doesn't seem to be much point.

There really aren't good secured cards out there unless you have $$$$$ to drop on one, opening a card with a $300 credit limit and paying an annual fee of $35 for the privilege of having the card, just feels like the company is trying to screw you over. The only real benefit of having the card is the opportunity to build credit.

So what happens? I have car trouble on the road end up needing a motel for a couple of nights and in the end I have $784.23 charged on a card with an $800 limit. It's not a problem because I have some cash put away for these things, but the problem is a couple days later before I got a payment sent I got the notice that my statement was ready, so my card reported with a utilization that almost shows that it's maxed out. At the same time while making an online purchase with my other card, I accidentally ordered next day air. Not a big issue, but one card has a 80% utilization and the other looks to be maxed out and my low credit score went down.

Next thing I know my mom is yelling at me because I don't know how to use a credit card plus in her eyes a credit card should only be used in an emergency and she didn't feel this was an emergency. According to my mom, I need someone I can call and ask what an emergency is 24hrs. a day because I clearly don't know. I don't consider what I did to be so real bad because both cards have since been paid up. My mom on the other hand says if I want to keep a credit card I need to seek the help of a professional counselor.

Honestly, she needs lots of help because she won't accept any help from me. She tried to get a couple of friends to help me, but what they did was print out a copy of my report on Credit Karma and gave it to my mom. I had some not so nice words to say and now they won't help with anything, so my mom is pissed again.

My mom wanted me to find some sort of professional counselor, someone who would constantly keep an eye on my credit and tell me exactly what to do and when to do it. She said I would then need to follow their exact instructions, no thinking for myself. What I then did was I managed to open an online account with Ally Bank. Now I have 2 bank accounts, one with my back hills cornfield bank where I have a window to deposit cash and I'll use that account to pay bills. The Ally account lets me spend up to $2,500 each day on their debit card and I can use any ATM to get cash.

Right now I just don't see my credit cards are worth the stress they are causing, all I need is an Ally debit card for everything and I could get my deposit back. When I was talking to someone they said secured cards were coded somehow so future lenders looking at your credit report know the cards are secured so they really do nothing for your credit and after a couple months with them my score is lower than when I started so I really don't see any value in them.

So then if I close them now before having them open very long, it really won't hurt much, correct? Sorry if this sounds kind of stupid, but I'm sick of being preached at how to use credit cards because I know what the plan was when I applied for the cards, but in real life it's hard to follow the plan.

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Postby JNK » Tue Oct 23, 2012 2:36 am

Credit scores are based on MANY things and not just ONE thing.

- length of your general credit history on average
- length of your credit history on your oldest account
- amount of time with credit opened under your name
- credit utilization at the time of reporting
- highest amount used in history (I think)
- payment habits

For better or for worse, the end of my thought is this:

If you plan on using credit in the future, you will need to have an established history somewhere. Yes, a high utilization on a card is not a good thing, but if you've paid it off, then it's also paid off and gone and your credit report will ALSO show that as well and as you continue to build credit, that $700+ emergency charge that was immediately paid off is going to be less and less significant. Also, the whole point of opening the credit lines in the first place - secured or not - was to start your credit history to begin with.

So let's say you close the accounts. You just closed the lifelines of those two cards and on your credit report it will say you had a credit history of X time between when you opened the accounts and when you closed the accounts, which isn't a long time. Let's say you decide to apply for some other card at some other time. Now when a creditor looks at your credit history, they will see two shortly-in-use lines that were closed... and nothing else. To my knowledge, that would be worse than having a continuing history that shows use and good paying-off history.

It SUCKS to have to pay a fee for the securement of the card, though; that I totally get - especially if you're not getting much of a benefit from it. Unfortunately, if you're in the new process of building credit and can't get an unsecured card without going secured first, then it simply might be something that has to happen until you're on better grounds.

Your choice is ultimately your choice; hopefully some others here on the forum can chime in with their own thoughts on the matter.

All that said, have you seen an official my FICO report before (and not just something from Equifax or whatever)? The my FICO report explains in detail what things can help or hurt your credit score. If you haven't and would like to see what's generated in a my FICO report, I can copy and paste the generalities of it for you to see so you can get a clear picture of what, exactly, FICO calculates.

EDIT: I don't know why the forum posted my pre-edited post first while I was still writing. This is the correct post that should have posted.
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Postby namvet » Tue Oct 23, 2012 8:12 am

Well said JNK! Can't add anything to that!

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Postby circle_k » Tue Oct 23, 2012 11:34 pm

You really need to seek the help of a professional credit counselor, just look up credit counseling in the yellow pages, you should have someplace local that can help you. I see a big mistake you are making with your cards, when building credit, you should only be making a small charge on each card, $10 is plenty to show activity. Now whatever you do, don't carry your cards, I repeat, don't carry your cards. Lock them in the safe until next month or if that doesn't work for you, freeze them in a block of ice. I have a serious issue when someone says credit cards are for emergencies, first a credit card should never be used like a second source of income, if you can't afford it without a credit card then you CAN'T afford it WITH a credit card. It just sounds good and responsible to say that credit cards should only be used in emergencies, but in practice, it's impossible.

I think the idea of opening an account with Ally Bank is the best I've heard of, today's debit cards work exactly like credit cards, no difference except there's no credit extended so debit cards do nothing to help build credit. On the same token, if you put $800 on a debit card and then use it to purchase a $780 television, that's perfectly fine. Just whatever you do, don't cancel any credit cards just yet, wait for your scores to improve then get at least one un-secured card first.

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Postby Vermonster » Wed Oct 24, 2012 1:31 pm

circle_k wrote:Now whatever you do, don't carry your cards, I repeat, don't carry your cards. Lock them in the safe until next month or if that doesn't work for you, freeze them in a block of ice.

I'd have to agree with that 100%. I would have my Freedom in a safe if we didn't use it so often for groceries.

Shop; I would seriously consider just using you debit card for purchases. Maybe even have a saving account so you don't have direct access to 100% of your money. Then I would only use your cards once a month to make a $10 Purchase. Keep paying the bills on time and keep them open. In a year you could then try for an unsecured card.
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