Voluntary credit card cancellation

Since retiring, I have not used a number of credit cards that I needed for my job.
I have received letters from the credit companies advising that unless I use them, they will be cancelled by them within 60 days. 
That's fine by me, however I have been warned that cancellation may affect my credit score.
Apparently this will also happen even although I cancel them myself.
I believe this to be an unfair practice by the banks in that it could affect the credit limit of cards that I do use, being advised of my reduced credit score and perhaps affecting any increase or reducing, my borrowing level.
I tend now to just use two specific cards, and pay both off each month. 
I appreciate that the credit card companies do cancel cards of bad payers and for other reasons, but surely someone who is cancelling an unused card, should be excluded from a possible reduction to their credit scoring.

Comments

  • born_again
    born_again Posts: 14,335 Forumite
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    As often repeated. Credit score means nothing. It is never seen by any lenders.
    What counts is credit history & missed payments.

    Credit score has nothing to do with banks. It is a made up figure by the Credit Reference Agencies.


    Life in the slow lane
  • amanda1024
    amanda1024 Posts: 396 Forumite
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    I think the only mitigation would be to try to close them gradually rather than all at the same time (which might mean continuing to use some for the odd payment). I think the issue is that other credit providers don’t have the information about why the accounts are being closed so can only speculate.
  • Gandalf644
    Gandalf644 Posts: 45 Forumite
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    edited 24 February at 1:10PM
    If the cards are not being used, why not just ring up and cancel them yourself now, rather than await them be closed due to being dormant?
    Banks do not want dormant cards on their books so will in effect be glad to be rid of those accounts.


  • Kim_13
    Kim_13 Posts: 2,387 Forumite
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    Lenders look at the amount of credit you are using relative to the amount available to you - if a card is closed and all other factors remain the same, that utilisation percentage goes up. Whether the customer opted to close the card or the provider wished to do so/reduce a limit doesn’t change the outcome of this equation.

    If you are worried about lenders scoring you differently - the score given by CRA’s is a made up number by someone who doesn’t have money to lend you - put any small recurring card payments (e.g. Cloud Storage, Netflix or similar) on the cards that would otherwise be closed and make sure that you have a direct debit set up to clear them in full every month.
  • grumbler
    grumbler Posts: 58,629 Forumite
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    edited 24 February at 1:30PM
    oldmand said:

    That's fine by me, however I have been warned that cancellation may affect my credit score.
    Apparently this will also happen even although I cancel them myself.
    I believe this to be an unfair practice by the banks in that it could affect the credit limit of cards that I do use, being advised of my reduced credit score and perhaps affecting any increase or reducing, my borrowing level.
    I tend now to just use two specific cards, and pay both off each month.
    Scoring can be affected, not the 'score'.
    Scoring is based on your credit history and other factors. Nothing 'unfair' here.
    No cards - less history, but the remaining two cards will do the job if you pay them in full. Otherwise, as said above, credit utilisation can become too high, that will have negative effect.
    On the other hand, having too many cards can have negative effect too because (available credit)/(income) ratio can become too high.
    If you don't want unused cards closed, just make a purchase once in a while to keep them alive.

  • Brie
    Brie Posts: 9,906 Forumite
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    Given that you are retired and presumably already have a mortgage, have fully paid your mortgage or rent and never intend to buy a property why are you concerned about your credit score or even your credit history?  If you have no need of credit beyond what you have already then your credit history is immaterial.  

    Obviously not every retired person's life is the same - mine is much simpler and I'm looking at closing some things down to make it even easier to manage.  
    "Never retract, never explain, never apologise; get things done and let them howl.”
  • lr1277
    lr1277 Posts: 1,670 Forumite
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    edited 24 February at 2:24PM
    I would caution you with the following:

    I don't know how easy it is to get new credit when you are retired. On another forum, a user mentioned that she coudn't get an Amex even though she had a reliable regular pension. It was only when she mentioned she also got some money for tutoring part-time did Amex give her a card.
    I have 2 cards close on me based on the provider closing down the service. This was even though at least one card was my usual spending card. And due to my income situation I couldn't get another card. And i know credit scores are meaningless but my credit score at the time was 990+. So even though I paid off everything I borrowed on time, I still could not get credit to replace the credit I had taken away from me.
    My analysis at the time was that co-branded cards are more likely to be closed than cards provided directly by banks/building societies.There are exceptions to this,but in my view probably true on the whole.
    Based on my experences, I would consider keeping most if not all the cards and putting a small amount through them every month and paying them off on time.

    Edited to add: I did lose one card, the Jaja card because I was only putting through about £12-£15 most months as a foreign transaction. Some cardholders did get to keep their card because they were payiing interest on the amounts they owed. I paid off my monthly bill on time. But my understainding is that Jaja got rid of most of their customers.
  • blue.peter
    blue.peter Posts: 1,203 Forumite
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    edited 24 February at 3:01PM
    lr1277 said:

    I don't know how easy it is to get new credit when you are retired.

    In my case, not at all difficult. I've been retired eight years. In that time, I've applied for at least six credit cards*, and not been refused once. I've also had at least three issuers increase my credit limit in the last few years. At one point, AmEx set my credit limit to 50% of my gross annual income - a figure vastly greater than I'd ever need.

    I've also closed several cards in that period. Doing that doesn't appear to have affected my ability to obtain new ones. (At one stage, I had six open accounts. I'm now down to two - one Visa and one MasterCard.)

    Clearly, retirement alone isn't a problem. And nor is closing unwanted credit cards. There might, however, be other factors that affect someone's ability to obtain credit in retirement.

    *Amazon (NewDay), American Express, Nationwide, Santander, TSB, Virgin.
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