Closing Credit Card Accounts - possibly stupid question

littlesaint

I'm going travelling for almost a year from September and I have four or five credit cards. Obviously, I'll need at least one to go travelling, but I'd like to keep things really simple while I go away, in case I get robbed or something.

I'm going to keep my Nationwide Visa open and possibly one of my Mastercards. I'd like to close the others. My question is, is this wise? Would it affect my credit rating? I could keep them open and leave them with my parents, but they would still get mail and stuff.

Also, if I do decide to close. How would I go about it?

skyrider007

Don't close them. You never know when you might need those extra credit for emergency plus it may be difficult to get them back after you've ditched them. I have heard that closing accounts do no good to your credit reports unless you have like 20 cards and use 90% of your £100,000 limit.

Just keep the cards in a safe at home so you don't plan to use them and ask the banks to hold statements in branch or opt for paperless statements while you're away.

littlesaint

Thanks for the link to Martin's article Lattridge. Will check that out.

skyrider007

Lattridge wrote: »

Sorry but that is absolute rubbish and really bad advice..

Do you have to be so rude?

---

I am just offering my opinion.

I have noticed in the past that people who have closed credit accounts and left the UK for a year or more find it difficult to obtain credit on their return.

As for fear of fraud, I am pretty sure the OP will have internet access wherever s/he may go - so it's not that difficult to manage accounts remotely these days. Opting for paperless statements also reduce risk of identity theft.

If you do cancel a card, you can compound your error even further by canceling the card that you've had the longest period of time and on which you've been making regular payments. By canceling an old card, the length of your credit history on open accounts will grow shorter. Credit-scoring formulas take into account the credit histories of even closed accounts in assessing how long you've been managing credit. That history will finally disappear from the formula when a credit bureau of its own accord removes old credit account information from your credit file.

The scoring algorithm is weighted such that if you maintain that older account, you're better off because it goes to a pattern of payment history. Nevertheless, if it's an older account that you don't use, and you're paying fees on it, you're probably better off closing it out for privacy rather than credit score reasons.

If you're intent on canceling a card, cancel a younger card or cancel one on which the credit card issuer doesn't report to all CRAs.

more advice from Fool.com

Don't Cancel That Credit Card!
By Dayana Yochim March 24, 2008


Recommendations
Unless your idea of "streamlined" finances is having eight credit cards in your wallet, you've probably considered canceling some of credit cards you don't use often.

Before you dash off "Dear John" letters to your lenders, first make sure you're not doing more harm than good by parting ways.

The truth about canceling credit cards
Do unused lines of credit hurt your credit score -- or help it? Will removing old information about already closed accounts make you look more (or less) attractive to bankers?

Great questions. Let's clear up some common misconceptions:

Closing accounts will not undo anything. Once a credit card is in play, there's no denying its existence. It's on your permanent record -- your credit report -- for at least seven years. Yes, even if you cancel the card the next day. Same goes for any red marks (late payments, charge-offs, overspending) associated with your accounts. Sorry, you simply can't deny your past. But at least it will fade away and, for most negative entries, fall off your report in seven years. However, you might not want some entries to disappear ...

Why deny the good? Removing old closed accounts that have no negative items is a bad idea because you benefit from a long credit history, and those accounts speak to that history. (Good entries can remain on your report forever.) Remember, 15% of your credit score is determined by how long you've been borrowing.

Closing accounts might hurt your credit score. Lenders take a hard look at the ratio between the balances on your revolving accounts and your total available credit. If you do have debt, try to keep it to less than 30% of your available credit. (The ideal number here is, of course, 0%.) Go ahead and keep those lines of credit open, but don't be tempted by untouched lines. When you close out open accounts, those credit lines are no longer factored into your ratio. Thus, your debt as a percentage of available credit will increase. Ouch.

Why cancel cards at all?
It may sound like the lending industry loves customers who have gobs of plastic, but as with most things, it's best not to binge. Once you acquire more than seven revolving debt accounts, your credit score begins to suffer a little. And while simply closing accounts won't necessarily have an immediate positive effect, over time it could boost your credit score. So let's see if it's time to break up with some of your banks.

Keep the oldies ... As we said above, commitment counts, and lenders see long-held accounts as proof that you are the responsible citizen that we know you are. So, if it's the choice between parting ways with that dashing new sliver of plastic in your wallet or the faded alumni credit card you got when you still had hair, keep the latter.

... and the goodies. If you get points, miles, cash back, good karma from using a credit card, and -- this is important -- you actually take advantage of the goodies that come with membership, keep the card in play. It's good to know, however, that credit cards with rewards programs are really common. So if the card carries an annual fee, call and ask if it can be waived. If you don't get back what you pay annually to use it, consider cancelling.

Dump the flighty ones. Just because your credit boasted a single-digit interest rate when you got it doesn't mean it will do so indefinitely. Nothing's uglier than paying for a new transmission at a 23.9% interest rate. Those credit cards that have ever-shifting rules and rates require an eagle eye be kept on all those leaflets that come in the mail. If you're not the type to keep your eye on the dealer, this card may be a lot more trouble than it's worth to keep in play.

Keep the ones that stood by you in bad times.
If debt was a problem in the past and may become one in the future, keep open those accounts where you have a decent track record -- meaning no (or few) bloopers (like late payments or overages) -- and a longstanding relationship. If the low-interest offers dry up, your room for negotiating a better deal is best with a lender that has fond long-term memories of your time together.

Hold on to your single days. If you're married, don't give up your identity entirely. Simply being an authorized user on your sweetheart's credit cards won't help you establish credit or keep your reputation intact. You must keep at least one line of credit from your single days open and active, and in your name only. If you don't occasionally use the card your file will go dormant and become unscoreable.

In addition to using the nuts and bolts of your credit card program, other factors may play a role in reviewing your lending relationships. Customer service is a biggie for some, and it's usually not an issue until something goes wrong.

The right way to close a credit card account
Simply cutting up the card and calling it quits doesn't count. An unused card is still an active account (until expiration), so while you might not be getting a bill in the mail, the bank still counts you as a customer. If your number gets in the wrong hands, you might not notice until it's too late.

To end your relationship with your lender for real, call the number on your card statement and find your way to a live operator. Specify that you want the account closed -- and this is important -- "at the cardholder's request." It's a minor point, but it looks better on your credit report if the account was terminated by the user and not the lender.

Know when to hold them, when to fold them
It's tempting to do a major spring cleaning and dump all the dusty cards from your wallet at one time. However, cutting off too many lines of credit at once can give the wrong impression on your credit score. Again, the level of "acceptable credit" depends on your income. Too high, and you're a risk. Too low, and your banker may wonder why you don't qualify for more. Still, with responsible credit usage -- paying your bills on time, every time -- any short-term blip will be history in no time.

skyrider007

Lattridge wrote: »

What your advocating is that they should have as much access to credit (AKA DEBT) as possible????????

I am not advocating anything nor am I recommending the OP to go into debts. I am just trying to help the OP maintain a good credit rating while s/he is away and to have those credit available once s/he return to the UK.

This is a public forum so please accept others opinions.

littlesaint

OK, so what about if you have more than one card with the same provider? I've been with one provider for, say, twelve years. Two years ago they sent me a gold card, which I have never used. Last year, I took advantage of a 0% deal with the same provider. Would they keep my entire credit history, if I cancelled the card I'd had the longest, even if I still had an credit card with them?

PROLIANT

Skyrider, don't be disheartened by that idiot, the advice have give on this forum and many others is sound and it's people Lattridge who need to get their facts straight, everything that you have stated here is true and correct, but Lattridge clearly does not agree with this fact and chooses to disbelieve it.