Should I cancel cards? credit score

database90

Hi

I am currently trying to rescue my credit score after a few years of being young and irresponsible with my finances. I currently have 4 credit cards which I will have paid off in the next 3 months. Once I have done this, would it be wise to cancel 2 of the newer cards? The main card is around 5 years old with a credit limit of 1750 which I will keep, and the 2nd card is around 4 years old with a limit of £250. I'm thinking of keeping these and then cancelling the 2 newer cards which are both 12 months old with a limit of £750 in total.

Would it hurt me more to cancel these cards right now or help me? Could I even cancel 3 of the cards?

Thank you to anyone that can offer any advice

Rothstein

Cancelling will negatively affect your score , yes SCORE !, as your overall credit limit will drop, affecting your utilisation ratio

Just don't use them, but keep them

Lemonsqueezer78

Don't obsess about the score. Just focus on managing your credit well. Cancel any cards you don't need and don't intend to use. Use the cards you do keep and pay them off in full monthly and on time. If I were you I would keep the ones with the first and second highest limits and get rid of the others. A main card and one for a back up is fine.

The credit utilisation calculations Rothstein is talking about aren't the be-all-end-all.... having multiple credit cards all with extremely low credit limits - as you seem to have - can itself be a red flag for lenders. Its can tell them (as part of their own internal scoring models) that other lenders aren't willing to lend you very much - i.e that you are not a good risk - so I would certainly not be overly worried about clinging on to cards with £250/£350 limits.

Rothstein

DO obsess about the score,
DONT cancel the cards

Rothstein

Utilisation is 30% of the score, you do the math, because Lemonhead can't....

database90

Thank you for your replies.

I didn't mention but at the point in time where I was thinking of cancelling 2 cards, the balance on all the cards would be 0 as I will have paid them off so the credit card utilisation shouldn't be affected, just the overall credit limit?

Then I was planning on using the remaining 2 cards to start building a better history.

PixelPound

Rothstein wrote: »

Cancelling will negatively affect your score , yes SCORE !, as your overall credit limit will drop, affecting your utilisation ratio

Just don't use them, but keep them

And cancelling newer cards will increase the average age of accounts so effect the score POSITIVELY. Since the OP is paying off all cards then utilisation isn't a factor. Cancelling cards will also mean that they go into the Settled section and this also can have a POSITIVE result on the score especially if the OP doesn't have any settled accounts at present. The available credit as a portion of his annual salary will also change which can be positive.

Whether the overall effect of cancelling will make a score go up or down I cannot say because we don't have either the algorithm that the CRA's use or what other elements on the OP's credit file may be a factor.

There is also the question of why the OP wants to rescue his score, as a score is only useful at the point you want to get credit. If its for credit card offers, then does his existing card holders have offers, he could ask and they may offer something similar without needing to apply for a new card. Or maybe they only offer new applicants juicy offers, and so closing may be best (I closed my 10+ year barclaycard because their offers to existing card holders was pitiful compared to new applicants).

database90

nic_c wrote: »

And cancelling newer cards will increase the average age of accounts so effect the score POSITIVELY. Since the OP is paying off all cards then utilisation isn't a factor. Cancelling cards will also mean that they go into the Settled section and this also can have a POSITIVE result on the score especially if the OP doesn't have any settled accounts at present. The available credit as a portion of his annual salary will also change which can be positive.

Whether the overall effect of cancelling will make a score go up or down I cannot say because we don't have either the algorithm that the CRA's use or what other elements on the OP's post may be a factor.

There is also the question of why the OP wants to rescue his score, as a score is only useful at the point you want to get credit. If its for credit card offers, then does his existing card holders have offers, he could ask and they may offer something similar without needing to apply for a new card. Or maybe they only offer new applicants juicy offers, and so closing may be best (I closed my 10+ year barclaycard because their offers to existing card holders was pitiful compared to new applicants).

Thank you for taking the time to reply, I really appreciate it. I plan to pay off my cards and then wish to start saving for a house with my partner and so I am really focused now on building a better credit history over the next 2 years to give me the best chance of being approved for a mortgage when the time comes!

PixelPound

database90 wrote: »

Thank you for taking the time to reply, I really appreciate it. I plan to pay off my cards and then wish to start saving for a house with my partner and so I am really focused now on building a better credit history over the next 2 years to give me the best chance of being approved for a mortgage when the time comes!

Mortgage companies tend to look at the level of your debt, so having them closed or open with a zero balance most likely won't matter. Credit cards can often be useful after you have bought a house for unexpected purchases or help cash liquidity. They do say to not open/close cards in the 6 months prior to applying for a mortgage as companies want to see stability.

I had 3 MBNA cards (originally two were ASDA and Virgin), and I closed 2 about a year before getting a mortgage (one card used to give balance transfer offers all the time, the other two didn't). Shortly after I got my mortgage MBNA offered me a 30 month BT offer which was really convenient

PixelPound

database90 wrote: »

I currently have 4 credit cards which I will have paid off in the next 3 months. Once I have done this, would it be wise to cancel 2 of the newer cards? The main card is around 5 years old with a credit limit of 1750 which I will keep, and the 2nd card is around 4 years old with a limit of £250. I'm thinking of keeping these and then cancelling the 2 newer cards which are both 12 months old with a limit of £750 in total.

Would it hurt me more to cancel these cards right now or help me? Could I even cancel 3 of the cards?

Keeping 2 cards is useful (at the very least it means you can make use of balance transfers). As 2 cards are just a year old, closing these two will increase the average age. Once they show as closed on your credit files, ask the other two for a limit increase, if they have been looked after well there shouldn't be a problem (assuming you haven't asked in the last year and they have been used responsibly in the last year too). A higher limit on a card shows that the company trust you, where as £250 may show the opposite (even if this was what you were initially given and have never asked for an increase nor gone any way near the limit). Use the two remaining cards for regular day to day use and clear the balance each month.

Lemonsqueezer78

Rothstein wrote: »

Utilisation is 30% of the score, you do the math, because Lemonhead can't....

You pressume "the score" actually matters. It doesn't. Feel free to bow, scrape and grovel at its feet if you want to. Most of us have seen too many examples of how meaningless those scores are, to do that. .