Switching to another credit card... Keep previous account open? - Tilted Forum Project Discussion Community

Jimellow · 07-12-2009, 08:44 AM

I've read that one of the factors that helps determine one's credit rating (FICO score) in regards to credit cards is the length of time the account has been open.

If this is true and I found a better card, would it then make sense to leave the old card that I'm replacing open with a balance of $0, or would you recommend closing the old account instead?

I don't carry a balance and instead use the card as a means for getting some cash back every month, so there would be no concerns regarding balance transfers or rates.

Martian · 07-12-2009, 08:52 AM

There are a number of considerations here.

The bigger issue in terms of your creditworthiness is amount of available credit. If you have a lot of open, unused credit it can affect your ability to apply for more in the future. Payment history is also an issue, and why the account was closed when it is closed.

If this is only your second credit card, then it's not a big deal to keep it. If you have more than two or three, though, or if you have any other lines of credit I'd probably close the account.

Baraka_Guru · 07-12-2009, 09:22 AM

There's nothing wrong with having two credit cards if your overall credit limit is reasonable compared to your income, especially if your old card has a long and favourable history.

It's all about your ability to pay and history of having paid.

Jimellow · 07-12-2009, 09:40 AM

The current card I have is the only open line of credit I have, and I've never missed a payment, made a late payment, or carried a balance beyond a few dollars.

In regards to Martian's comment regarding open/unused credit: The newer card would have a significantly higher credit line, but I wouldn't be spending any more than I do now, so I would have more "unused" credit in the sense that there would be a higher amount available if I should need it, though I don't put things on credit unless I'm sure I can afford the bill at the end of the month.

If I did keep the older/replaced card open (and I suspect I will), I likely would throw it in a drawer somewhere and not carry it with me; as I'd be wary of accidentally using it a few times, losing track, and missing payments as a result of multiple card usage.

Do credit card companies still issue statements if the card's balance is $0?

Xerxys · 07-12-2009, 10:19 AM

Yes they still do issue statements and you might have to still pay the annual fee if it has one. But in this case, no, do not close it unless you are 100% sure you have milked the best FICO out of it. That is, have had it for more than a year and your current FICO score is better than "good".

The_Jazz · 07-12-2009, 10:28 AM

Unless the annual fee is too high for your taste, there's no good reason to close it and many reasons not to. Closing it will hurt your credit score, so if you plan on financing a large purchase in the near future (car, house, etc.), then it's a bad idea. You're clearly using your credit responsibly, so you want to continue to do so. However if a large financed purchase is impossible in the next few years for whatever reason, then close the account since it won't do you any good.

Jimellow · 07-12-2009, 10:29 AM

Thanks for the replies.

Do you have any recommendations in regards to what I should set me credit limit at?

The form allows me to set a limit, and I've read that ideally a user spends 30% of his limit per month, on average. Does that sound right?

I don't need a high spending limit, but I would like to have the option of putting larger purchases on the card without it going over the % of limit that is going to ultimately hurt my rating.

At what point does going over the % of limit negatively affect an account; immediately or only if you carry a balance? I don't carry a balance, and if the overage only applies to carried balances, I don't need my limit nearly as high.

NoSoup · 07-13-2009, 06:49 PM

Quote:

Originally Posted by Jimellow

Thanks for the replies.

Do you have any recommendations in regards to what I should set me credit limit at?

The form allows me to set a limit, and I've read that ideally a user spends 30% of his limit per month, on average. Does that sound right?

I don't need a high spending limit, but I would like to have the option of putting larger purchases on the card without it going over the % of limit that is going to ultimately hurt my rating.

At what point does going over the % of limit negatively affect an account; immediately or only if you carry a balance? I don't carry a balance, and if the overage only applies to carried balances, I don't need my limit nearly as high.

Get the highest limit you can get approved for - having unused extra credit line has a nominal impact on your score, and it will help you long term to keep a lower credit limit ratio.

Since it doesn't appear you're in the "need a low limit to ensure you don't overspend catagory" it shouldn't have any impact on your actual spending. That said, it doesn't necessarily matter if you just charge an amount and pay it off, or you actually carry a balance, your score will begin to be negatively affected if you go over 30% of your limit. However, it doesn't have a significanly negative impact until over 50% of your limit.

And.......Bringing it back from the grave one more time

http://www.tfproject.org/tfp/tilted-...nt-credit.html

07-12-2009, 08:44 AM	#1 (permalink)
Jimellow Junkie	Switching to another credit card... Keep previous account open? I've read that one of the factors that helps determine one's credit rating (FICO score) in regards to credit cards is the length of time the account has been open. If this is true and I found a better card, would it then make sense to leave the old card that I'm replacing open with a balance of $0, or would you recommend closing the old account instead? I don't carry a balance and instead use the card as a means for getting some cash back every month, so there would be no concerns regarding balance transfers or rates. __________________ Desperation is no excuse for lowering one's standards.

07-12-2009, 08:52 AM	#2 (permalink)
Martian Young Crumudgeon Location: Canada	There are a number of considerations here. The bigger issue in terms of your creditworthiness is amount of available credit. If you have a lot of open, unused credit it can affect your ability to apply for more in the future. Payment history is also an issue, and why the account was closed when it is closed. If this is only your second credit card, then it's not a big deal to keep it. If you have more than two or three, though, or if you have any other lines of credit I'd probably close the account. __________________ I wake up in the morning more tired than before I slept I get through cryin' and I'm sadder than before I wept I get through thinkin' now, and the thoughts have left my head I get through speakin' and I can't remember, not a word that I said - Ben Harper, Show Me A Little Shame

07-12-2009, 09:22 AM	#3 (permalink)
Baraka_Guru warrior bodhisattva Super Moderator Location: East-central Canada	There's nothing wrong with having two credit cards if your overall credit limit is reasonable compared to your income, especially if your old card has a long and favourable history. It's all about your ability to pay and history of having paid. __________________ Knowing that death is certain and that the time of death is uncertain, what's the most important thing? —Bhikkhuni Pema Chödrön Humankind cannot bear very much reality. —From "Burnt Norton," Four Quartets (1936), T. S. Eliot

07-12-2009, 09:40 AM	#4 (permalink)
Jimellow Junkie	The current card I have is the only open line of credit I have, and I've never missed a payment, made a late payment, or carried a balance beyond a few dollars. In regards to Martian's comment regarding open/unused credit: The newer card would have a significantly higher credit line, but I wouldn't be spending any more than I do now, so I would have more "unused" credit in the sense that there would be a higher amount available if I should need it, though I don't put things on credit unless I'm sure I can afford the bill at the end of the month. If I did keep the older/replaced card open (and I suspect I will), I likely would throw it in a drawer somewhere and not carry it with me; as I'd be wary of accidentally using it a few times, losing track, and missing payments as a result of multiple card usage. Do credit card companies still issue statements if the card's balance is $0? __________________ Desperation is no excuse for lowering one's standards.

07-12-2009, 10:28 AM	#6 (permalink)
The_Jazz Asshole Administrator Location: Chicago	Unless the annual fee is too high for your taste, there's no good reason to close it and many reasons not to. Closing it will hurt your credit score, so if you plan on financing a large purchase in the near future (car, house, etc.), then it's a bad idea. You're clearly using your credit responsibly, so you want to continue to do so. However if a large financed purchase is impossible in the next few years for whatever reason, then close the account since it won't do you any good. __________________ "They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin "There ought to be limits to freedom." - George W. Bush "We have met the enemy and he is us." - Pogo

07-12-2009, 10:19 AM	#5 (permalink)
Xerxys Junkie Location: My head.	Yes they still do issue statements and you might have to still pay the annual fee if it has one. But in this case, no, do not close it unless you are 100% sure you have milked the best FICO out of it. That is, have had it for more than a year and your current FICO score is better than "good".

07-12-2009, 10:29 AM	#7 (permalink)
Jimellow Junkie	Thanks for the replies. Do you have any recommendations in regards to what I should set me credit limit at? The form allows me to set a limit, and I've read that ideally a user spends 30% of his limit per month, on average. Does that sound right? I don't need a high spending limit, but I would like to have the option of putting larger purchases on the card without it going over the % of limit that is going to ultimately hurt my rating. At what point does going over the % of limit negatively affect an account; immediately or only if you carry a balance? I don't carry a balance, and if the overage only applies to carried balances, I don't need my limit nearly as high. __________________ Desperation is no excuse for lowering one's standards.