by Mr Credit Card
Here’s a question from a reader:
I have a orchard credit card and a premiere credit card. Orchard’s service, professionalism and ease of paying on line is the best. However, Premiere credit card has outrageous charges, they charge when you pay on line etc. I want to cancel my premiere card. If I cancel the card would that hurt my credit score. Please advise.
Mr Robert Strauss
Answer – Hey Robert – As a general rule, every time you close a credit card, your score should go down (could be a lot or just a little). It depends on a few factors.
How long has your account been open – Your length of credit history is one component of your credit score. Hence, as a general rule, you do not want to close your oldest account. But rather, you should be better off closing a newer account.
What is your credit line and limits? – Your credit utilization is an important component of your credit score. Credit utilization is how much credit you are using versus how much credit is available to you. The lower the utilization ratio, the better your score will (all else equal) because you will be perceived to be less of a risk versus someone who is maxed out! So, other than how long you have had the card, your credit line plays an important role as well. You generally do not want to close an account with a large credit line relatively to your other credit sources.
Here’s a visual breakdown of what is important for your FICO score
Are the accounts closed by you or did the credit card issuer cut your lines – An account that is closed by you is looked upon better than if your credit lines got cut
Your situation – Given your situation it appears you are in the phase of rebuilding your credit (why else would you have an Orchard Bank and a First Premier Bank credit card. You have not told me (us) what your credit lines are and I suspect they are not in the 5 figures. I also think you do not have these for years and years because who would want to pay those annual fees on these cards?
So here’s what I’ll do if I were you given what I think are your circumstances.
Cancel your First Premier Bank Card – since you prefer Orchard and the fact that you have to pay annual fees for the First Premier Card.
Your score may take a slight hit – But I suspect it will not be much since I do not think you have a very credit line with First Premier, this shouldn’t be too bad
Do not use more than 30% of your available credit lines – It’s no good to have a high credit utilization ratio. So never charge more than 30% of what your credit lines are on your card.
Pay off your bills fully every month – This is the quickest way to a higher score
Make sure you pay on time too – Looks like you pay through the internet and you are net savvy so I think this should be a piece of cake for you. But I cannot stress this enough for our readers – Paying on time is so important
Do all these and within one year, Orchard Bank should upgrade your card to a no annual fee one. If not, your score should improve sufficiently for you to get one from someone like Capital One or Citi.
This entry was posted
on Monday, June 1st, 2009 at 11:20 and is filed under Credit Cards FAQ, Credit Score Repair FAQ.
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June 1st, 2009 at 20:00
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