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I have a credit card from 1st Financial Bank. I got it when I was 18 years old, and have kept up with it 100%.

After the recent US legislation on credit cards, they have started hiking various fees. There is now a yearly membership fee, late payment fees have almost doubled, etc.

I have decided to drop this card and get a more "friendly" one.

How will this affect my credit rating? Will I lose my 6+ years of history on the card?

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4 Answers

up vote 10 down vote accepted

The number that really matters in this situation is your age of your longest account. Opening a new account is a good idea, but closing an old one may have an impact on your score if you have no other active accounts. If you have another card, or an overdraft line of credit or a car loan that is 4 or 5 years old, you won't see a big impact.

I'd suggest calling the card company and asking them to waive the fee. They usually will. In the meantime, I would recommending having one card from each of the major networks. (MC, Visa, Discover, Amex) so you don't run into this again. Just don't open them all at once.

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+1 for waiving the fee. Maybe they can change your account type and get the best of both worlds –  MrChrister Sep 28 '10 at 18:26
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Clark Howard suggests you hop your cards. Get your new card now and when you have it, dump the card with the high fees.

The age of your accounts has some impact on your credit rating, but unless you have a major purchase coming up and your score is teetering, I would take the score hit to save money on the card.

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Will I lose those 6 years of payment history? –  John Gietzen Sep 28 '10 at 17:28
    
While I couldn't say how much, I suspect 6 years of credit history isn't a huge benefit compared to 20 years. I don't really know. –  MrChrister Sep 28 '10 at 18:26
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I don't think you will lose the history, but I think the account might show up as closed. –  Timo Geusch Sep 28 '10 at 23:18
    
@Timo - that makes perfect sense. My credit report shows many closed accounts. –  MrChrister Sep 29 '10 at 1:07
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The Fair Credit Reporting Act (FCRA) says that account history will stay on your credit report as a closed account for 7 years, and then it will drop off, just like any other bad or good mark on your credit (aside from bankruptcies which stay on reports for 10 years, and can be asked about for the rest of your life).

The presence of a new credit card will do more to lower your score in the short term than closing an old credit card. On a related note, reporting a card as lost or stolen can also show up as a different, closed account, even if you keep the same account open with the creditor.

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From Experian's FAQ

How long does an item remain on my credit report?

A credit reporting agency stores information from credit grantors and public records, including bankruptcies, judgments and liens. Potentially negative information, such as missed payments and most public record items, remain on a personal credit report for seven years. The exceptions are Chapters 7, 11 and 12 bankruptcies, which remain for 10 years, and unpaid tax liens, which remain for 15 years. A paid tax lien will remain for seven years. Positive information may remain on a report indefinitely. Paid closed accounts generally display for 10 years. Requests for your credit history remain on your personal credit report for two years.

(This is a 'comment' to SpecKK's reply, but too long to make it as an actual comment)

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