Should you cancel your first credit card?

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travduke
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Should you cancel your first credit card?

Postby travduke » Fri Nov 30, 2012 7:15 pm

I have a capital one secured card with a $200 CL and have never had any late payments since I've had it for about 2 years now. I now have an unsecured card with capital one with a $500 CL along with a couple other store cards with a total CL of around $2600.

The secured card is the longest card I've had on my history and would like to know if cancelling would lower my credit score that I've spent 4 years and thousands of dollars to get back to the mid-600s.

Thank you!


silver6054
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Postby silver6054 » Sun Dec 02, 2012 7:50 pm

Cancelling a card impacts the score in two ways:

1) An immediate impact is in utilization. If you have outstanding balances reported (whether you pay in full or not after the statement is issued) part of your score is basically (all balances)/(all open credit lines). If you close a card, your utilization goes up which can decrease the score. This matters less if the CL on the card being closed is small (as is the case with yours) and/or the outstanding balances are small.

2) Average age of account. Closed accounts continue reporting for 10 years after closure, then drop off. So no immediate impact from this for 10 years, and by then you will probably have some older cards and it won't really matter.

People recommend not closing cards without good reason, mainly because of reason 1 above (and not understanding 2!). Good reasons can include an annual fee, a deposit you want returned, too much hassle to keep track of, or wanting to close a credit card with an issuer to get another better card from that issuer (some companies only allow you to have a certain number of cards with them, or a maximum credit limit on all their cards. Some allow you to do a change without closing one and applying for a new, but this depends on the issuer and the cards involved).

travduke
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Postby travduke » Sun Dec 02, 2012 9:03 pm

Thanks for the reply! Exactly the answers I was looking for. I just don't see the point of keeping it open since I get no benefits or anything with it, can use the deposit to pay other balances.

MemberSince99
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Postby MemberSince99 » Mon Dec 03, 2012 7:28 pm

Once you get better cards you truly don't need it. Any score hit, which honestly would be 90+ percent AAoA, will go away in time anyway.

MaxPunishment
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Postby MaxPunishment » Mon Dec 03, 2012 9:06 pm

Unless there's an annual fee involved, there's really not a reason to close a credit card account that's in goodstanding. If anything you might try to raise the credit limit of that card if you've had a good history with the bank just to improve your credit utilization across the board and to help your score further. Having multiple lines of credit with some age to them is never a bad thing

MemberSince99
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Postby MemberSince99 » Mon Dec 03, 2012 9:42 pm

Max, that's not always true. First it depends on the card you have and the card you want to get. Amex for example does NOT like to see creditors like First Premier on your report - there are a good number of reports I've read of people being declined and this was cited as one of the reasons. So in that case you'd want to move to something better if you want an Amex card.

Also, FICO does recognize whether you have "toy" limit cards vs high limit, and from what I've read it does affect your score (one of the "positives" they listed on mine was that I had some higher limit cards).

Also be aware that Cap One just does not do CLIs on their lower end cards as a rule. Some people have called the executive office, and a few others have gotten a CLI out of the blue after 5 or 10 years, but then hey some people win the lottery too. He can certainly try to get a CLI out of Capital One, but if I were a betting man I wouldn't put down a 5 dollar bill against 100 on it being successful if that tells you anything.

I'm just citing exceptions to the rule, by the way, in general you are correct, just want to clarify!



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