How will closing my credit card affect my credit?

Question

When I was a teen, my mom opened a credit card with Capital One and added me as an authorized user. I used this credit card for pretty much everything, but when I went to get a loan for a home years later, the mortgage company told me I have pretty much no established credit. So while I was the only user of this card and paid it off in full every month, it did not seem to affect my credit much, if at all.

After that I opened a new credit card myself (again with Capital One), but it only had a limit of $1000. This was fine for most of my needs. But I started having periodic purchases that were close to or exceeded the limit, and the limit actually prevented my purchase of some items. I contacted Capital One and they refused to increase my limit (even though my credit is excellent I can more than afford a higher limit) but they declined because my past spending history indicated I don't need it.

My Dad then informed me he has a Costco membership. We talked and he added me as a secondary user. I applied for a credit card and was approved for a $9800 limit which was great! Now its time to renew the Costco membership but my dad doesn't really go to Costco anymore and is considering canceling the membership, which will also cancel my credit card.

I've had the Costco credit card for almost 9 months, the 1k capital one card for a year or two, and the join capital one card for about 10 years. All of them are currently open and in good standing.

I kind of agree with my dad that there is no reason to be paying $60 a month for the costco card when the benefits it provides aren't really used (only real benefit for me is the gas, but that involves going out of my way and waiting in long lines to get, and isn't really worth it to me.)

If we close the Costco credit card (or either of the other two cards that are never used), will it negatively affect my credit?

Will it cause problems applying for additional credit cards in the immediate future? (I will need a new card to replace the costco one with high enough limits)

Answer 1

When I was a teen, my mom opened a credit card with Capital One and added me as an authorized user. I used this credit card for pretty much everything, but when I went to get a loan for a home years later, the mortgage company told me I have pretty much no established credit.

"Pretty much" does not mean "no established credit". It just means that your file is thin.

Having said that, I'm kinda surprised, since I added my children to my CC and it imputed an excellent score to them when they turned 18.

Of course... it was a thin file, since that's all they had (and all my daughter still has).

I started having periodic purchases that were close to or exceeded the limit, and the limit actually prevented my purchase of some items.

There's no mandate that you only pay a bill on the due date. (I usually pay my CC bill every Sunday night, and always at EOM; budgeting is made easier when money spent "this month" should be paid from money earned "this month", IMO.)

If we close the Costco credit card (or either of the other two cards that are never used), will it negatively affect my credit?

Closing a younger CC account "damages" your credit score less than closing an old account. But it'll recover.

Even so, the existence of the account will stay in your file for many years (up to seven, I think).

And $720/year is a lot of money, so I'd close the Costco card.

Answer 2

Applying for multiple credit cards would certainly hit your credit score. It makes you look desperate to borrow money. Better to pick one card that you are eligible for, and apply for that.

There may be a temporary dip in your score, but you now have the new card, so it hardly matters. Once you use the card, the score will recover.

Actually, it's not worth obsessing about credit scores too much anyway. They are generated by secret formulae, that nobody but the credit reference agencies know. Even lenders (such as credit card companies) don't take them too seriously.