Avoid Negative Credit Score When Cancelling a Card

digitalvibe

My understanding is that when you cancel a credit card (that was in good standing, i.e. balance fully paid), this then presents itself as a "negative" within your credit score. For years, I've avoided this by keeping cards I don't really want or need and making a small purchase every six months or so and then paying it off in full but this is becoming difficult to manage so would much rather get rid of the cards I don't need. Is there a way to do this without it having a negative impact on my credit score?

Brie

not an issue really as a bank doesnt care about your score. even if they did it would only matter if you plan on applying for a loan in the next few months.

penners324

Just cancel the 1s you don't need.

I cancelled a credit card a couple of months ago and my score went down for 1 month then back up again.

The biggest impact of your credit file is having too much available credit from too many cards.

And the score is totally irrelevant 

Ebe_Scrooge

To echo the above, your score is absolutely meaningless.

In terms of your credit history - which is what really matters - then long-standing, well-managed lines of credit are seen as a positive.  And when a prospective lender looks at your credit file, they'll see that a card has been closed - they won't know whether you chose to close it, or whether the card issuer closed it (due to misuse or whatever).

So, as far as it goes, closing a card can have a detrimental effect on your history.

HOWEVER ... having too much credit available can also be a bad thing.  And if you have several other cards that you use regularly, and always pay in full each month, then the effect of closing a couple of cards will be minimal - and will only be short-term.  So if you don't really need the cards, and you're only keeping them active for the sake of it, then close them.

Your score will almost certainly drop when you do this - your score drops in response to any change in credit circumstances, whether good or bad.  But since the score you see plays no part in lending decisions, and in fact is not even visible to lenders, this matters not one jot

martinbainbridge1975

I once had 4/5 cards with a considerable amount available on each which was way more than my annual salary, I cut all except one card up and closed the accounts and currently have 1 with a limit of £2.5k.

This appears to have reduced my rating despite all being paid and managed on time, the insight notifications I get regularly from experian and clearscore is that having 4k limit or above available would improve my rating.

I would agree with the 2 remarks above its striking the correct balance and having sufficient limits without causing detriment to yourself, maybe keep 2 cards including the one that has been open longest,  and have a total limit of 6-7k available and rotate them

etienneg

martinbainbridge1975 said:

I would agree with the 2 remarks above ...

Except that the two post above yours both stress the irrelevance of the scores, yet you still appear to be bothered by their ratings of you!

In some countries (e.g. USA) you do have a single score which is available to all potential lenders and is therefore important. In the UK this is not the case. The various credit reference agencies each come up with their own score, but this is based on the very limited amount of data they hold. For example, it does not include any information about your income. It is not available to anyone except you. Also be aware that they each use the score that they generate to encourage you to spend money on things that will improve your score (via their 'insight notifications') such as additional credit cards - interestingly, things that also make money for them!

By contrast, actual lenders each score you (differently) using data that you provide in an application for credit as well as the data from their preferred credit agency or agencies. These are the scores that matter, but you will never see them as they are kept secret by the lenders.

In other words, completely ignore all reference by credit agencies to your score. Nobody can actually know how you can improve the (secret) scores determined by actual lenders. You can only have a vague idea what they will think is important, and this will differ widely between lenders. That's why you should check the likelihood of getting credit on the web sites of particular lenders, and not rely on comparison sites that again are a third party's guess at what might be important.

martinbainbridge1975

etienneg said:

martinbainbridge1975 said:

I would agree with the 2 remarks above ...

Except that the two post above yours both stress the irrelevance of the scores, yet you still appear to be bothered by their ratings of you!

In some countries (e.g. USA) you do have a single score which is available to all potential lenders and is therefore important. In the UK this is not the case. The various credit reference agencies each come up with their own score, but this is based on the very limited amount of data they hold. For example, it does not include any information about your income. It is not available to anyone except you. Also be aware that they each use the score that they generate to encourage you to spend money on things that will improve your score (via their 'insight notifications') such as additional credit cards - interestingly, things that also make money for them!

By contrast, actual lenders each score you (differently) using data that you provide in an application for credit as well as the data from their preferred credit agency or agencies. These are the scores that matter, but you will never see them as they are kept secret by the lenders.

In other words, completely ignore all reference by credit agencies to your score. Nobody can actually know how you can improve the (secret) scores determined by actual lenders. You can only have a vague idea what they will think is important, and this will differ widely between lenders. That's why you should check the likelihood of getting credit on the web sites of particular lenders, and not rely on comparison sites that again are a third party's guess at what might be important.

What i am saying is that you can go from having too much available to too little and this can go against you in the short term.

I have learned from others on here is that what you think is a good course of action is not necessarily what the lender thinks, for example closing a card or reducing a limit - there is no indication given as to who requested or actioned this so in theory it could go against you.

Experian appears to be the main agency used, I no longer take insight data 100% for granted as an example experian rate me as 0% eligible for 2 lenders, when on the actual site of the lender I am pre-approved - strange but true 

Ebe_Scrooge

martinbainbridge1975 said:

etienneg said:

martinbainbridge1975 said:

I would agree with the 2 remarks above ...

Except that the two post above yours both stress the irrelevance of the scores, yet you still appear to be bothered by their ratings of you!

In some countries (e.g. USA) you do have a single score which is available to all potential lenders and is therefore important. In the UK this is not the case. The various credit reference agencies each come up with their own score, but this is based on the very limited amount of data they hold. For example, it does not include any information about your income. It is not available to anyone except you. Also be aware that they each use the score that they generate to encourage you to spend money on things that will improve your score (via their 'insight notifications') such as additional credit cards - interestingly, things that also make money for them!

By contrast, actual lenders each score you (differently) using data that you provide in an application for credit as well as the data from their preferred credit agency or agencies. These are the scores that matter, but you will never see them as they are kept secret by the lenders.

In other words, completely ignore all reference by credit agencies to your score. Nobody can actually know how you can improve the (secret) scores determined by actual lenders. You can only have a vague idea what they will think is important, and this will differ widely between lenders. That's why you should check the likelihood of getting credit on the web sites of particular lenders, and not rely on comparison sites that again are a third party's guess at what might be important.

as an example experian rate me as 0% eligible for 2 lenders, when on the actual site of the lender I am pre-approved - strange but true 

Which perhaps just reinforces the fact that you should largely ignore what the CRAs tell you.

Don't get me wrong - they provide a valuable service to lenders, by collating actual data regarding your credit history, passing (selling) that on to lenders, and allowing lenders to run it through their systems.  Each lender has very different criteria, so you may be a "perfect" customer in one lender's eyes, and a "no thanks" for another.  Experian et al have no way of knowing what a particular lender's criteria are - they just go by the "generally accepted rules", such as lots of defaults or missed payments will probably mean a refusal.

What the CRAs are useful for, from a consumer's point of view, is to check that the data they hold are complete and factually accurate.  Other than that, you can ignore any "recommendations" they give you.

Flat_Earther

martinbainbridge1975 said:

etienneg said:

martinbainbridge1975 said:

I would agree with the 2 remarks above ...

Except that the two post above yours both stress the irrelevance of the scores, yet you still appear to be bothered by their ratings of you!

In some countries (e.g. USA) you do have a single score which is available to all potential lenders and is therefore important. In the UK this is not the case. The various credit reference agencies each come up with their own score, but this is based on the very limited amount of data they hold. For example, it does not include any information about your income. It is not available to anyone except you. Also be aware that they each use the score that they generate to encourage you to spend money on things that will improve your score (via their 'insight notifications') such as additional credit cards - interestingly, things that also make money for them!

By contrast, actual lenders each score you (differently) using data that you provide in an application for credit as well as the data from their preferred credit agency or agencies. These are the scores that matter, but you will never see them as they are kept secret by the lenders.

In other words, completely ignore all reference by credit agencies to your score. Nobody can actually know how you can improve the (secret) scores determined by actual lenders. You can only have a vague idea what they will think is important, and this will differ widely between lenders. That's why you should check the likelihood of getting credit on the web sites of particular lenders, and not rely on comparison sites that again are a third party's guess at what might be important.

What i am saying is that you can go from having too much available to too little and this can go against you in the short term.

I have learned from others on here is that what you think is a good course of action is not necessarily what the lender thinks, for example closing a card or reducing a limit - there is no indication given as to who requested or actioned this so in theory it could go against you.

Experian appears to be the main agency used, I no longer take insight data 100% for granted as an example experian rate me as 0% eligible for 2 lenders, when on the actual site of the lender I am pre-approved - strange but true 

If a card is closed with a zero balance and no other markers, no reasonable person is going to infer anything untoward has gone on.

It's absurd to think that people are forced into keeping financial accounts open otherwise they'll be viewed negatively by other lenders.

As someone who has previously worked for a bank, and above bog standard customer level, I have no issues closing down unused lines of credit or any financial account for that matter, and have never had any problems obtaining credit when needed.