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I have three credit cards, but I only use the newest. I pay it off in full every month, and the two older credit cards haven't seen a single transaction in over a year. None have an annual payment, so it doesn't hurt anything to keep them, but I just don't like having these unused credit cards sitting around and I'd like to simplify stuff.

I'm in the process of buying a house, and I'll of course wait until after closing to get rid of my unused credit cards. If I have to replace my car, I'll buy a used car with cash. So, after closing on my mortgage, I don't expect to be applying for credit for at least a few years. My credit score is currently very good, so I feel like I have some room to breathe, and I rarely hit 30% utilization on the one credit card I actually do use, so I'm not concerned about high utilization or bumping up against my credit limit.

I know my credit score will take a bit of a hit, but I have a student loan that I'm still making payments on (about 15k left on that), and will have a mortgage that I'll be making payments on. I always make my payments on time, so I feel that any impact will be small and short-lived. Is there anything I'm not thinking about here?

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I have to disagree with some of the other posters.

It is a common misconception that closing old cards will hurt your credit score.

It is my understanding that you can close older cards without worry. Cancelled credit cards still stay on your credit report for 10 years.

http://www.bankrate.com/finance/credit-cards/closing-credit-card-dings-credit-score-1.aspx

The impact is lowering your available credit, and changing your debt/credit ratio.

While there is no real advantage to closing lines of credit, it doesn't really matter which lines you close. Your credit report will still show your history of good credit, whether the line of credit is still open or not.

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  • In most circumstances, closing a line of credit lowers available credit and changes the ratio, which as you noted, is the harm to a credit score. For all intents and purposes, you cannot close a line of credit without changing your ration for the worse; hence the conventional wisdom.
    – MrChrister
    Jan 25, 2012 at 21:54
  • Definitely, MrChrister, but there's no difference between closing an old card and a new card. Old credit cards, even if cancelled, remain on your credit report. The original poster can also compensate for closing unused cards by asking for credit limit increases.
    – MattMcA
    Jan 26, 2012 at 1:24
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As I understand it, canceling your two older credit cards could hurt your credit score in two ways:

  • By canceling the older cards, you are reducing the average age of your credit lines. Having a higher average age (i.e. a longer credit history) is better, so this can reduce your score.
  • By canceling any credit cards, you are reducing you maximum credit. This will also increase your credit utilization. If you are usually below 20% utilization on even the single account, this may not affect you much, but decreasing your available credit and increasing your credit utilization may lower your score.

A possible way to ameliorate these credit score reductions could be to:

  • Cancel the newer account and keep one of the older ones instead, to preserve the average age of your credit lines.
  • Ask the account you are keeping for an increase to your credit limit. If you are a good client, they will probably do this for you. If not, ask to talk to the cancelation department (they have more authority to help you). You can threaten to transfer a balance (if you have one) to another card, or just to stop using their card.
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  • My newest card has the best rewards and the highest credit limit, which is why I'm keeping it and why I'm not using either of my other cards. I understand it will reduce my score, and I'm not really looking for ways to avoid reducing my score. I'm more wondering if I should even worry about reducing my score by a few points when I'm not even planning on asking for more credit.
    – Adam Jaskiewicz
    Jan 24, 2012 at 23:46
  • @Adam I figured there was a reason to keep the newer card. If you understand the consequences you can do whatever you wish. However, you never know when a high credit rating may be useful. Depending on your life plans, that may be more useful than the peace of mind that comes from closing some old accounts.
    – Steven
    Jan 25, 2012 at 5:30
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I think you missed the part about the average age of your lines, which will decrease when/if you close the other two accounts. Personally I would not close the lines, as you can't be sure what would happen after the home purchase. What if your car blows up, you purchase the new one with cash as you state. Then two weeks later your washer & dryer go out, again you have cash to pay for it only now your emergency fund is empty. If in a couple of weeks your HVAC goes out you might not have the credit to pay for it as you closed your accounts.

I have a few cards just like yours that I don't use. I simply keep them locked up in a fireproof safe. Are those occurrences likely to all happen within that time period, probably not, but it could happen.

In other words think about more than your score from closing. Just because you don't utilize now doesn't mean you won't later. I've also found that unused cards will often offer better terms on advances then ones you consistently use -- this is just anecdotal evidence though.

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    The op has a card that he uses and keeps at basically a $0 balance. Keeping the account open only so you have a line of credit (that the OP can probably get back should he need) is not a good reason.
    – user4127
    Jan 24, 2012 at 17:26
  • The HVAC is pretty new so I'm not too worried about it. My car will probably blow up soon, which is why I'm prepared to replace it (it's 12 years old and has almost 200,000 miles) I wouldn't consider that an "emergency"; it's something I'm expecting, so it's budgeted for. I know that my credit score will be impacted, but I'm asking how much I should even care.
    – Adam Jaskiewicz
    Jan 24, 2012 at 23:54
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Good Job planning until after the purchase of a house, and addressing the car purchase. When people make changes as part of the home purchase they can magnify the impact, because they make the change just when they need stability.

Because you will be dropping the older credit cards the impact will be greater compared to the impact of closing the newer card.

Make sure you have a big enough credit limit to cover the cost of a major car repair, or to buy furniture for the house. The use of the credit card makes these purchases easier. Remember to pay them off right away, to minimize interest costs, and to rebuild your credit faster.

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  • Thanks. The credit limit on the newest card is also the highest, and it's more than enough to cover a major car repair (actually, it's more than the blue-book value of my car). I do have some furniture from my apartment, and will buy more slowly as my budget allows, so I'm not too concerned about that.
    – Adam Jaskiewicz
    Jan 24, 2012 at 23:41
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I think you should cut your credit cards in half instead of cancelling them. Her's why I think so:

  1. Your older credit cards carry greater weight in credit scoring so cancelling them will definitely hurt your credit.

  2. If you don't have any outstanding balance, having more credit that's not being used will work in your favor. You may get better interest rate on your home loan because you are using your credit wisely.

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In my opinion if you are not going to use the old cards in the future and you have enough credit limit on the new card it is best to close the old cards for 2 main reasons.

Reason 1: If you are going for a home loan to buy your house, I would close the cards beforehand. I don't know what country you are from, probably the US, but in Australia when an applicant applies for a home loan, the bank looks at two main criteria. Your LVR (Loan to Value Ratio), the value of the loan to the value of the asset to make sure there is enough value in the asset to cover the loan in case you default on the mortgage payments. Secondly, they look at your total income compared to your total expenses to make sure you have enough income to cover all expenses including the new loan. If you have multiple credit cards the bank will total all the credit limits from all your credit cards and include a percentage of this as part of your expenses. This may affect the amount you are able to borrow.

Reason 2: If you are not using the cards, you may put them away somewhere and forget where they are, you could lose them or they could be stolen from you. All these factors may increase the chances that someone may end up stealing your identity and/or using your unused credit cards and funds.

If you are not using the cards and you don't intend to in the future, close them off and destroy the cards ASAP.

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    I've already been approved for a loan and locked in my rate, so I don't think Reason 1 applies. If I manage to trash my credit report before the closing date, they will pull the loan, so I'm not planning to make any changes until I've signed on the dotted line. Reason 2 is somewhat of a concern.
    – Adam Jaskiewicz
    Jan 24, 2012 at 23:38
  • And yes, I'm in the U.S., and here one of the things they look at is your history of credit use, so having long-standing credit cards is good (as long as you pay your bills).
    – Adam Jaskiewicz
    Jan 24, 2012 at 23:57
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    Regarding reason 2: if the card is stolen and he suddenly gets a bill, dispute it with the lender. It is only a slight pain to dispute a fraudulent transaction (when compared to lines of credit opened secretly in one's name). Cut the cards to shreds and leave it be.
    – MrChrister
    Jan 25, 2012 at 21:59
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At the end of the day, this is really of little consequence.

Your credit score may suffer a marginal hit for some period of time, but it will not be some life-changing event. If it isn't really important to you, let sleeping dogs lie, as there is no benefit to closing the accounts.

But, if you feel good about closing the accounts, do it.

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  • This is all true, but if they are buying a house, best wait until after the deal is closed to close anything. Even if approved and locked in, don't risk changing your situation when you could just wait.
    – MrChrister
    Jan 25, 2012 at 21:57

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