I have about 5 department store credit cards that I never use. If I cancel those accounts, will my score improve? Even a little? Again, these aren't credit cards. They're store cards (like Home Depot, Office Max, etc.) If I shouldn't close these accounts, then how can I improve my score? I pay off my one credit card monthly, and my other debts are a mortgage and a car payment.
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6FYI Department store cards are credit cards. They may or may not be with a name-brand bank. They may or may not be reported to the credit reporting bureaus for use on your credit report.– Alex BAug 17, 2010 at 15:49
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Such a meaningless edit of a 8.5 year old question, @Kat ¯_(ツ)_/¯– dvnielFeb 4, 2019 at 10:22
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3 Answers
I'm no expert, but my understanding is you should NOT close these cards. They are credit cards even though they've been issued by a store, and will affect your credit score. Some things that the credit score likes are
- older credit lines that have been around for awhile
- small or no balances in relation to your total credit line
Your best bet is just to cut them up and forget about them.
If you want to improve your score, NEVER miss a payment on your mortgage, your car, or your credit cards, and dispute any errors on your credit report. Do NOT request too many new credit cards (better to ask for a credit line raise on your old cards).
More reading here: http://articles.moneycentral.msn.com/Banking/YourCreditRating/7FastFixesForYourCreditScore.aspx
answered Aug 17, 2010 at 15:53
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I think you're right to a point, but since I can never find a true formula for calculating, I just hear rumors. And I've heard a rumor that having a high number of open accounts (even with zero balance) or having too high of available credit can actually reduce your score. It may also have to do with the installment/revolving ratio - credit cards are revolving, which is less desirable to the bureaus.– Joe EnosAug 17, 2010 at 22:26
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@joe that's because the credit reporting formula is actually a trade secret, so no one is going to publish exactly how it works. Aug 18, 2010 at 16:02
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You'd think it would have leaked by now. Lots of people must know it, and I'm sure some people would pay handsomely for it. All it takes is one.– Joe EnosAug 18, 2010 at 17:31
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But the actual formula is also getting tweaked over time, so the actual numbers are ultimately meaningless as they'll be quickly out of date. On the other hand, the credit bureaus will freely share tips on improving your credit score through generic "good" behavior, without sharing the specifics. Oct 28, 2010 at 21:46
You will impact two factors - Average account age. If these accounts are older than your average, you are worse off. If newer, you will increase the average account age and improve your score. Credit utilization. By getting rid of available credit, any remaining balances result in higher utilization. This is counter-intuitive, but part of the stated rating calculation. I discussed the scoring process in an article Your Credit Score, in greater detail.
I added the above image in response to Patches comment. Nowhere is there a breakout of which card has what. Most of the $20K shown is a zero interest offer that was good for a year, $15K pulled at a one year cost of $50. It was used to pay against a 5% mortgage (since refinanced). The $15K is 100% of that card's line. It's only for the other available credit that my report is not dinged for utilization. Respectfully, I disagree that individual card's utilization affects the score. it's total debt out of total available lines.
answered Oct 28, 2010 at 2:47
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Along with the higher utilization goes the credit / income ratio. Having too much credit available compared to your income can have a negative effect, so you have to balance that against utilization. Oct 28, 2010 at 21:47
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Ben - you are right, but this aspect is not a credit score issue. The FICO score does not know your income. Credit to income comes into play for manually approved loans where income is disclosed. Oct 29, 2010 at 2:30
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@Patches - see my update in my answer and if you have a link or reference, please reply. Jan 8, 2012 at 15:37
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@JoeTaxpayer well, I remember reading it quite clearly, as it seemed odd to me. However, looking around for a link I'm finding only exactly what you're saying: that it's a ratio total revolving debt to total revolving credit limit. So, it appears I was wrong. I'll delete my erroneous comment.– PatchesJan 10, 2012 at 15:04
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@JoeTaxpayer so the average age is only based on currently open accounts?– user5108Oct 6, 2015 at 3:27
Closing those accounts can have an impact on your credit score. One of the factors in calculating your credit score is the amount of credit you have already been approved for. So closing accounts you don't use will lower the amount of credit you have available. That should increase your credit some.
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1Source? It's my understanding that it's your debt to credit ratio that raises your credit score... i.e. if you have a lot of credit lines across different cards but carry no balance, you will have a better credit score than someone with no cards. Aug 17, 2010 at 15:49
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Wrong. It the number of accounts only has a tiny affect on your score. Having accounts disappear off your record, thus removing credit history, has a far greater effect. Especially if those accounts are the oldest -- in which case you're effectively shortening your credit history.– PatchesJan 8, 2012 at 14:49
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@Patches - here, you are dead on correct. If the accounts are older than average, removing them shortens your history. It also can raise your utilization which is bad. Jan 8, 2012 at 21:29