cancelling credit cards

[shecky]

i hate credit card companies. my conversation with Capital One an hour ago:

Me: id like to cancel this card

Them: why?

M: because i have just gotten another card with a much lower rate, a higher credit limit and no annual fee, and i have no need for this one any longer.

T: what rate are you getting on the new card?

M: X%

T: what if i could give you X-5% on this card for you to keep it and waive the fee. that way you have both cards!

M: because i do not need to have that much open credit and i have no need for two cards.

T: but its a great rate!

M: well, how about this, since the new card i just got is also with capital one, how about i cancel this card and you give me the rate of X-5% you just offered me on the one i just opened up?

T: *** crickets ***

M: I thought so. just cancel the card and stop wasting my time, please.

T: certainly, sir.


since i rarely if ever carry a balance on cards anymore the rate difference is almost irrelevant. i just love the way you say "cancel" and they get out the kneepads to keep you on board.

 

[EricNau]

For what it's worth, I've heard that canceling credit cards actually hurts your credit score - it better just to cut 'em up and throw them in the trash.

 

[shecky]

its irrelevant if the balance on the card is zero, which this one is. even if it was negative, id rather not have it around regardless.

http://www.bankrate.com/brm/news/cc/20020102a.asp (last few paragraphs)

 

[Jonnyfive]

For what it's worth, I've heard that canceling credit cards actually hurts your credit score - it better just to cut 'em up and throw them in the trash.

That is incorrect. In fact the more credit cards you have hurts your credit score because each credit card you have is assumed that you are making payment. So if you just cut them up and toss em it assumes you are still making payments on it.

 

[EricNau]

its irrelevant if the balance on the card is zero, which this one is. even if it was negative, id rather not have it around regardless.

http://www.bankrate.com/brm/news/cc/20020102a.asp (last few paragraphs)

OK, that makes sense. Although, through a quick Google search, I came across this statement:

"But do not cancel unused cards right away. Doing so may lower your credit rating by making whatever amount you charge a higher percentage of your total available credit."​

That is incorrect. In fact the more credit cards you have hurts your credit score because each credit card you have is assumed that you are making payment. So if you just cut them up and toss em it assumes you are still making payments on it.

I knew that as well, but I'm sure unused credit cards eventually cancel themselves.

 

[Turkish]

For what it's worth, I've heard that canceling credit cards actually hurts your credit score - it better just to cut 'em up and throw them in the trash.

Closing a credit card account that still has a balance on it can have a negative impact.

Closing a credit card account with no balance on it at your request actually has a positive impact.

 

[CEAbiscuit]

its irrelevant if the balance on the card is zero, which this one is. even if it was negative, id rather not have it around regardless.

http://www.bankrate.com/brm/news/cc/20020102a.asp (last few paragraphs)

From the very article you are referencing;

" "If your goal is to improve your credit score, closing accounts is not a good tactic," says Craig Watts, consumer affairs manager for Fair, Isaac and Co. based in San Rafael, Calif. "Paying down credit cards is terrific. Closing them is not going to help."

Canceling a large amount of unused credit could actually hurt your credit score. "


The basic idea is to keep a card open for 7 years or more. Anything less, if it's canceled and you jumping in and out of credit, looks bad. Your best bet is to just slice up the cards and leave them open (if there are no fees on the cards. if there's a fee, get rid of it).

 

[jcarm24]

My dad went through the same thing this weekend. He refused to tell the CC company why he was cancelling his card and they wouldn't let him do it. He finally ended up giving them an answer just to get them off his back. I understand why they want a reason, but it makes it that much more painful.

 

[CEAbiscuit]

If you need more credit cards and a lower rate, there's a good chance looking at the bottom ad of this thread will help you out... gotta love it...

 

[aristobrat]

About a year before I applied for my first mortgage, I watched my credit score like a hawk (using Equifax and Experian's websites).

A few things I learned:

The ratio of the amount you owe on all of your cards compared to the total credit on all of your cards weighs significantly towards your credit score. If you owe very little, reducing your total credit (by closing a card) may not hurt you because doing so won't change this ratio much. If you owe a moderate amount, reducing your total credit may cause your debt ratio to skyrocket. That hurts.

The amount of time (history) you've had an account open is part of your credit score too. A newly opened account with no (or little) history subtracts from your score. Depending on your situation, closing an account where you have a lot of history can hurt your score if you have few other long-standing accounts to show for.

Equifax and Experian both have simulators where you can do your "what ifs" (should I close that account? what happens if I'm 30 days late on just one of my accounts? what if I open a new account?) that will show you what your credit score would be if you took that action. I think you have to buy your credit score from them first, though.

 

[shecky]

i think this thread illustrates WHY credit cards are evil - nobody seems to have a clear and complete handle on how something as simple as closing an account affects one's credit score. i have read 10 different opinions from 10 different people on here and on the web.

my justification is that the old card (Card A) has had a zero balance on it for 6 months, had a fee, and had a very high interest rate. the new card (Card B), with the same company, tripled my available credit, had an interest rate less than half of card A's rate (tho higher than what they offered me to keep Card A, but only by a couple of points) and quite honestly i do not need more than one card. if it does dip my score, the score will recover. my score now is better than it has been in 15 years anyway.

 

[Turkish]

Your best bet is to just slice up the cards and leave them open (if there are no fees on the cards. if there's a fee, get rid of it).

Experian doesn't know whether they are cut up or not.

Have a VISA, a MC and maybe a Discover with decent limits and keep them paid off.

" "If your goal is to improve your credit score, closing accounts is not a good tactic," says Craig Watts, consumer affairs manager for Fair, Isaac and Co. based in San Rafael, Calif. "Paying down credit cards is terrific. Closing them is not going to help."

This is foolish advice for a person with credit issues (his target audience). The best thing a chronic debtor can do is to close his accounts, thus negating his ability to debt again.

If the person has decent credit, then they wouldn't be worrying about a possible 10 point jump by closing a dormant credit account.

There is nothing wrong with closing "spare" credit accounts if you already have credit extended to you elsewhere. You may get a temporary hit of 10 or more points in some cases, but that will disappear in mere months... I work with this stuff all day long for a living.

 

[CEAbiscuit]

Of course, all of these questions can be avoided if you pay off your balace every month. All I use is amex with a flex option on large purchases. Pay it off every month... if there is an emergency 5k that I need to spend, it can go on the flex. Have yet to use it. Plus I get free crap from their rewards people.

The amazing thing about Japan- the average Japanes person saves 30% of their income per year.

The amazing thing about the United States - the average person saves -5% per year.

I agree with the reporter who said every high school senior should see the movie Maxed Out. Terrifying...

 

[Turkish]

Of course, all of these questions can be avoided if you pay off your balace every month. All I use is amex with a flex option on large purchases. Pay it off every month... if there is an emergency 5k that I need to spend, it can go on the flex. Have yet to use it. Plus I get free crap from their rewards people.

The amazing thing about Japan- the average Japanes person saves 30% of their income per year.

The amazing thing about the United States - the average person saves -5% per year.

I agree with the reporter who said every high school senior should see the movie Maxed Out. Terrifying...

One part of the problem in this country is that the credit card lenders are just a hair short of predatory. I have people with $40,000 worth of credit issued to them (unsecured lines - VISA, MC, etc.) and they only make $50,000 a year. Someone who makes 50K a year should not have 40K worth of revolving credit extended to them in the first place.

I know - no one makes them spend the money, but if the government is going to go to all the trouble of issuing "guidance" on minimum payments for credit cards and pass sweeping reform to bankruptcy law in favor of the credit industry, then the credit industry should be "guided" from getting people into such huge trouble in the first place.

I have people come in my office with $60,000 worth of credit card debt... who in their right mind keeps extending unsecured debt in those amounts?

Greedy banks.

 

[shecky]

since it seems that there are a few people on this thread that actually know what they are talking about, and since this turned from the "yeah! screw capital one!" thread i was imagining, lets take advantage of the real conversation we seem to be having here by finding out some info that could be useful, like:

what are the best (lets say top 3) ways to increase one's credit score? and what constitutes a "bad" or "good" score (other than 0 or 850 - when do you cross the line from bad to good?) as far as tracking my credit, whats the best service out there? i have done a FreeCreditReport.com once before, but i get the feeling it is not as good as something else.

 

[yojitani]

since it seems that there are a few people on this thread that actually know what they are talking about, and since this turned from the "yeah! screw capital one!" thread i was imagining, lets take advantage of the real conversation we seem to be having here by finding out some info that could be useful, like:

what are the best (lets say top 3) ways to increase one's credit score? and what constitutes a "bad" or "good" score (other than 0 or 850 - when do you cross the line from bad to good?) as far as tracking my credit, whats the best service out there? i have done a FreeCreditReport.com once before, but i get the feeling it is not as good as something else.

Agreed. I'd really like to know all of this too. The information I've had is about as contradictory as it is here on this board...

This is more of a gripe, but if anyone has the answer (I mean a real answer, not 'because CC companies are driven by pure greed') I'd like to know: If a credit score is so essential (which it is), why is it that you have to pay to know your score? This seems wrongheaded to me. I mean this is information about ME that I have to pay for.

YT

 

[EricNau]

i think this thread illustrates WHY credit cards are evil...

Truly.

...And just wait until they retract your rewards because you don't carry a balance (that was Chase btw).

 

[CEAbiscuit]

since it seems that there are a few people on this thread that actually know what they are talking about, and since this turned from the "yeah! screw capital one!" thread i was imagining, lets take advantage of the real conversation we seem to be having here by finding out some info that could be useful, like:

what are the best (lets say top 3) ways to increase one's credit score? and what constitutes a "bad" or "good" score (other than 0 or 850 - when do you cross the line from bad to good?) as far as tracking my credit, whats the best service out there? i have done a FreeCreditReport.com once before, but i get the feeling it is not as good as something else.

Here you go Shecky, direct from CNN, the top 5: (BTW- I understand that if you credit score is above 700, you generally receive better rates)

Pay your bills on time. Delinquent payments can have a major negative impact on your score and the longer you pay your bills on time, the better your score. For example, someone with an average credit rating of 707 can raise their score by as much as 20 points by paying all their bills on time for one month.

Keep balances low on credit cards. High outstanding debt can affect your score. Maxing out your credit cards could lower your average score by as much as 70 points.

Don't open a number of new credit cards that you don't need. New accounts will lower your average account age, which could actually lower your score by up to 10 points.

Have credit cards - but manage them responsibly. In general, having credit cards and installment loans (and making timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

Closing an account doesn't make it go away. A closed account will still show up on your credit report and may be factored into the score.

 

[ezzie]

as far as tracking my credit, whats the best service out there? i have done a FreeCreditReport.com once before, but i get the feeling it is not as good as something else.

the actual site for your yearly credit report is www.annualcreditreport.com. the best thing to do with this site, since you get reports from all 3 bureaus separately, is to check one credit bureau every 4 months, so you've got a picture of your credit throughout the year. it's my understanding that freecreditreport.com charges you something...and that's not what your free annual report is about.

what kills me is that there are so many people that don't even know they're entitled to a free credit report each year.

EDIT: oh, yeah....screw capital one!

 

[CEAbiscuit]

Thanks for the credit report direction. I did have to pay 7 bucks for the actual score. If there is way not to do that, let us know. Thanks!

 

[Poseidon]

the actual site for your yearly credit report is www.annualcreditreport.com. the best thing to do with this site, since you get reports from all 3 bureaus separately, is to check one credit bureau every 4 months, so you've got a picture of your credit throughout the year. it's my understanding that freecreditreport.com charges you something...and that's not what your free annual report is about.

EDIT: oh, yeah....screw capital one!

That's a really good idea - since stumbling across this site a couple years ago, I make sure to mention this site and this tactic to anyone if the subject comes up.

Another tip: if you've been turned down in the past for a loan or credit card based on the information in your credit reports, you will typically get a letter from the lender or company telling you so. If you do, you have 60 days from receipt of that letter to mail a reqest to the specificied credit reporting company requesting a free copy of your records; this is above and beyond the free reports you're entitled to at the website mentioned above.

Thanks for the credit report direction. I did have to pay 7 bucks for the actual score. If there is way not to do that, let us know. Thanks!

I haven't run across anything yet that gives you a free FICO score - typically you have to pay for it or it is provided as part of a larger package. For example some of the credit reporting companies are running programs that for X a month, you get free access to your credit reports and score.

In addition be on the lookout for good offers from the credit reporting companies themselves. I've ordered enough credit reports from the big 3 and set up accounts with 'em so that I'm now on their mailing lists and frequently get mailings about deals they run, like 3 for 1 reports or reduced rate services. Certainly can't hurt to check out if you're concerned about your credit score.

 

[ezzie]

i got lucky with the credit score thing...

a few years back i got a credit card offer from providian...i didn't really know any details other than the interest rate was 0% for a year and i needed an iBook. an added perk was that when i logged in to my account online, i could see my FICO score for free...it's updated there once a month.

now that they've been bought/absorbed by washinton mutual, i still get the FICO score on my account page. it's nice to always know!

i know that doesn't help you guys! as far as i know, you have to pay for your credit score, but you don't need to check it that often. definitely check it way before buying a car/house/etc. so you know how hard to work on bringing your score up.

EDIT: wamu still does the free credit score with their credit card accounts...just FYI.

 

[Sdashiki]

I watched a docu on CCs. it included the guy who was paid by numerous, un-named, CC companies to figure out better ways to make a profit. He was the guy who decided on charging like 2% for minimum payments due, leaving people with more money to spend...which leads to more debt...

the best part was a, or THE (im not sure), guy who made up the idea of credit scores, or at least how to calculate them.

his company charges CC companies to use its software (i.e. algorithm) to calculate your credit score. CC co sends your info, this company spits back a number in a few days.

credit reporting companies are far removed from this company, they are not one in the same. This company's only business is billions and billions of dollars of credit scoring computations.

so, when you think about it, your credit score has more variables than the population of China that go into this math equation which spits out your credit score.

its a BS number, different variables affect the outcome in very different ways, and someone's (a company's) arbitrary idea of what can constitute a + or - on your credit score is just insane.

but somehow, "it works"

EDIT: wamu still does the free credit score with their credit card accounts...just FYI.

every look into your credit, hurts your score. so, for instance, shopping for a car at many dealers who pull your credit, by the end when you decide on a car, your score has been pushed down below the level they accept for the lowest interest. rare, but it could happen.

 

[ezzie]

@Sdashiki

i agree, it's sort of silly when you think about it...but credit scores are just there, and you have to keep them in decent shape if you want to make things like cell phones, utilities, a car, and especially a place to live.

there are too many people who just don't understand that. i think there should be a mandatory class in high school that teaches kids how to acquire/use/manage credit. i've seen too many of my friends get in over their heads because they just didn't understand how credit really works.

EDIT:

every look into your credit, hurts your score. so, for instance, shopping for a car at many dealers who pull your credit, by the end when you decide on a car, your score has been pushed down below the level they accept for the lowest interest. rare, but it could happen.

i don't know why a dealer would be pulling credit before you're decided on a car and ready to talk finance...but hey, i'm sure it happens. i know when you're purchasing a home, the bank/mortgage company inquiries all count as one for a certain amount of time to keep a credit score drop from happening like you described.

 

[Poseidon]

....
every look into your credit, hurts your score. so, for instance, shopping for a car at many dealers who pull your credit, by the end when you decide on a car, your score has been pushed down below the level they accept for the lowest interest. rare, but it could happen.
....

Depends on how you define a "look into your credit."

If we're talking about a CC company wanting information to make an unsolicited offer of a new card to you, this doesn't hurt you.

If we're talking about you looking into your account for whatever reason, this doesn't hurt you.

If we're talking about a situation where you have applied for a loan or credit card, that company will make an inquiry against your record that could potentially hurt you, especially if there are a number on your account. That's why it's not a good thing to get unneeded credit cards (or loans).