Think Twice Before Canceling Credit Cards

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Canceling credit cards can hurt your credit score!Canceling credit cards can hurt your credit score!
Before you cancel your credit cards, think twice about how it might affect your credit score. I made this mistake about two years ago when I canceled a card I had for over 8 years. Why did I cancel it? Because I hadn’t used it for 5 years, it wasn’t a rewards card like my…

Before you cancel your credit cards, think twice about how it might affect your credit score. I made this mistake about two years ago when I canceled a card I had for over 8 years. Why did I cancel it? Because I hadn’t used it for 5 years, it wasn’t a rewards card like my new credit card, and I didn’t think it would affect my credit score. But canceling that card actually had a negative affect on my credit score! Thankfully, I already had a good credit score and wasn’t planning on applying for any lines of credit at the time. But the story may be different for your situation.

Age of Credit is part of your credit score

Canceling credit cards can hurt your credit score!
Canceling credit cards can hurt your credit score!

At the time, I didn’t know how credit scores are determined. I thought that since I had an open line of credit that wasn’t being used, it would lower my credit score (too much available credit can be a bad thing). That was partially true, but I didn’t realize that the age of your credit history also affected your credit score.

That line of credit was open for 8 years, had a $1,000 limit, and I was never late or missed a payment. Besides that card, my newest lines of credit were another credit card and a car note, both of which were about a year old. Canceling that credit card reduced my average age of credit quite a bit, and there was no substantial benefit by reducing my line of credit by $1,000.

This chart breaks down the components of your FICO score.

credit-score-breakdown.png
Credit Score Components

As you can see by the above chart, making any drastic changes to any of the categories can affect your credit score. This would include missing payments, raising your credit utilization, canceling cards and reducing the length of your credit history, taking out new credit cards, and taking out different forms of credit (mortgages, store brand credit cards, student loans, etc.).

Now I think it through before making moves that will affect my credit score

Recently, my wife received a new Discover Card with 0% APR to replace an expired card, but she forgot she even had this particular card in her name! It turns out she used the card when she lived with her parents and even though she hadn’t used the card for several years, it was still active. We looked into it a little bit, and it turned out she had a $15,000 limit on it. Add that credit limit to another Discover Card, a credit card through our bank, and a mortgage in her name (she bought the house before we were married and I was never added to the mortgage), and we found out she has a lot of available credit to her name! Time to reduce the amount of credit to improve her score!

We called customer service to cancel the card and while we were going through the process, I remembered that we shouldn’t cancel the card because your length of credit history affects your score. This card was about 12 years old, which is a very good age to keep on your credit.  So now we had a reason to not cancel and one reason to cancel.

Well, it turns out credit card companies don’t like to lose customers, so they transferred us to a CSR intent on keeping us as customers. In the end, we kept the card open and had it switched to another Discover card which offers great rewards benefits. The Discover Card rep offered to lower the credit limit to $1,000, which is the minimum line of credit you can have. This helped lower her available credit limit and should help improve her credit score. In the end, it worked out for both parties. 🙂

I need to look up our credit scores

Now I have a confession. I don’t know my credit score (or my wife’s). The last time I checked was a couple years ago when I bought my car. My wife hasn’t checked hers in about the same amount of time, when she got a mortgage.

One of the reasons I’ve written about credit scores so often lately is because I knew I needed to check ours, and I was interested in learning about it. I figured I might as well share what I learned. Now I just need to go get my free credit score. I’ll share more about this later. 🙂



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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Eunice says

    I have a problem that I hope someone can help me with. I have in total, 10 credit cards, but I’m pretty sure that I have a good credit score because I make my payments in full and on time every time. 10 credit cards… yea I know. But in my defense, 8 of these credit cards are department store cards (Nordstrom, Macys, etc) and I only opened them to get the sign-up discounts. I probably only use the Nordstrom and Macys credit cards now and then, but only because I feel like I shouldn’t leave them inactive. But as for the rest of the cards… I don’t really use them because it’s not like I shop at those specific stores all the time and even when I do, I forget and use my debit card instead. The two major credit cards that I use is my Wells Fargo one and my Chase South West card, which I use the most because of the points. So now I am in a pickle. I really just want to stick with one credit card, but I have the other 9 looming over me. I don’t want the credit card companies to close my accounts because my cards go inactive because I know that will hurt my FICO score. But I don’t want to cancel my cards because I know THAT will hurt my score as well. It’s like… there’s no win-win situation. What the heck should I do?!?!?

  2. Peachy says

    Eunice, depending how long you’ve had your 10 cc’s, I would suggest that if the inactive ones are less than 3-4 years old, it would be ok to cancel them, and just keep the 6 with some seniority. Like some of the older posts have suggested, you can always set up a monthly re-occurring payment of bills or what not on each of the cards you decide to keep. Downsizing from 10 to 1 card is a bit drastic. Good Luck!

  3. Brian says

    About 4 years ago (in my not so smart days), I went over the limit a few times on my first credit card. Recently, i accidently used that same card for the wrong large purchase and went over the limit again by about 30 dollars. How negatively does this affect my score?

    • Ryan says

      Brian, Assuming this is the first transgression in 4 years it probably shouldn’t affect your score much at all. You may even be able to call your credit card company and ask them to remove the penalty and over the limit occurrence from your credit record. The key is to make sure it doesn’t happen again, so be sure to monitor your balances.

  4. Jen says

    Recently I had to close or cancel my AT&T credit card. I received a letter from AT&T stating that I will be charge $60 per year for their credit card and if I spend over $2,000 the $60.00 will be waived. Do you believe the nerves of these people. I have been a customer since 1999, however, I have not been using the card as frequently as they would like. I knew this would affect my credit, but I had no choice considering I am unemployed. I have excellent credit. How badly will this affect my credit?

    • Ryan says

      Jen, it depends on several factors, the most important of which are your average age of credit and your credit utilization. You will be closing a card that has been open for over 10 years, which will reduce your average age of credit, and you will also close a line of credit, which could affect your credit utilization (amount of credit used vs. amount of available credit). For example, if you have $5,000 debt and have credit lines equal to $50,000, your credit utilization is 10%. If you close an account with a $10,000 line of credit, you now have $5,000 debt on $40,000 available credit, increasing your utilization to 12.5%. The lower your utilization rate the better. Overall, it would be impossible for me to give you a number regarding how your score will be affected, but if you have other lines of credit and don’t have a lot of debt, the change most likely will not be substantial. If you are curious, you can check your score now, then again in a few months. Best of luck in finding new work!

  5. JAMES says

    I HAVE A 10,00 SECURED CREDIT CARD WITH BOA I HAVE HAD FOR 4YRS. I ALSO NOW HAVE A NOTHER SECURED CARD THREW WELS FAGO FOR 6,500 I HAE HAD FOR 6 MONTHS AND A UNSECURED CARD FOR 2 GRAND TREW CHASE BACK FOR 1 YEAR. ( I ALWAYS PAY OFF THE BALANCES ON ALL CARDS EARLY! AND MY DEPT TO CREDIT RATIO IS LOW, I DONT SPEND MORE THEN 1,000 A MONTH ON CREDIT CARDS….AVERAGE IS 300!!!)
    I ASKED BOA IF THEY COULD GRADUWATE MY SECURED CARD TO A NONSECURED CARD BUT SINCE HOW MY INCOME IS ONLY 800 A MONTH, THEY SAID NO, ALSO SAID ILL NEVER WILL GET A 10 GRAND UNSECRED CARD WITH PAY THAT LOW AND RECOMENED ON LOWERIG MY CREDIT LINE….BUT WILL NOT THAT HURT MY CREDIT SOCORE????ANY ADVICE? THANK YOU.

    • Ryan says

      James, if they didn’t require you to lower your balance, then it’s not necessary. Just be sure you never charge more than you can pay each month. You can also try upgrading one of your secured cards from Wells Fargo or Chase. Best of luck.

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