Comments on: Finances vs. Credit Part 1 of 4: Smart Financial Decisions That Hurt Your Credit Score

By: Money Hacks Carnival #19: The Independence Edition | Money Hackers Network

Money Hacks Carnival #19: The Independence Edition | Money Hackers Network — Tue, 29 Jul 2008 11:15:33 +0000

[...] Mr. Credit Card discusses smart financial moves that will hurt your credit score. Which is the best choice in that [...]

By: The Tuesday After Vacation Monday Linklet « Are You Going To Be This Way The Rest of The Time I Know You?

Tue, 08 Jul 2008 20:33:14 +0000

[...] Ask Mr. Credit Card talks about how making the smart financial choice may hurt your credit score in Finances vs. Credit Part 1 of 4: Smart Financial Decisions That Hurt Your Credit Score. I can’t wait to read the next three [...]

By: Carnival of 20-Something Finances, Brazil-Carnival Style! | Weak Wallet

Carnival of 20-Something Finances, Brazil-Carnival Style! | Weak Wallet — Tue, 01 Jul 2008 16:43:42 +0000

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By: Dollar Frugal » Blog Archive » Carnival of 20-Something Finances, Brazil-Carnival Style!

Mon, 30 Jun 2008 09:47:09 +0000

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By: Peter

Peter — Fri, 27 Jun 2008 16:41:42 +0000

I disagree. The effects of closing an account are greatly exaggerated. When an account is closed, it stays on your credit report for 10 years. So you will not see an immediate drop in your credit score due to age. Let’s say the account you’ve had since college is 10 years old. You have another account that’s 1 year old. Your average age is 5.5.
In 10 years, right before the account drops off, you will have 2 accounts whose ages are 20 and 11, for an average age of 15.5. After the old account drops off, you will have a single account whose age is 11. So your average age drops from 15.5 to 11. Big deal. In 10 years, hopefully, you have established a good credit record, paying everything on time, etc. This change will barely have an effect.

I agree that normally, there is no huge advantage to closing an account. Just cut up the card if you don’t want to use it. But if you are being charged an annual fee, then go ahead and close it.

Another option is to call the bank and see if they can transfer you to a different product. Usually a bank has many different credit card programs, some with a fee, some without, and with varying interest rates. If they transfer your account, you will retain the credit history.

As for the utilization, yes, that will immediately change if you close an account. But again, big deal. If it has a $5000 credit limit, just apply for another account or 2 to increase your total credit limit.

Don’t do any of this if you’re planning to apply for a mortgage or anything like this within the next 6 months. But normally, these actions should not have any long term effect on your credit score.