Lurking through some threads, I've seen posts that recommend leaving CCs with no AF open and making occasional purchases so they don't auto-close out. I find that a pretty big PITA- so I did some of my own research.
Assuming you are doing this sparingly enough that you're not raising obvious red flags for being a CC churner, what is the downside to just closing them- assuming you don't need the boost to your credit score (e.g. your AAOA and credit utilization is already healthy across your other accounts)?
- AAOAs- afaik these are calculated with all accounts, open or closed- so it doesn't matter if you close it or not.
- Credit utilization- Assuming your other accounts aren't being over-utilized, it actually helps to get rid of a neglected account.
- Available credit- this is the one where it'd hurt a little, but the accounts I'm interested in closing don't actually have much credit compared to my other accounts.
- None of the other categories are impacted afaik (payment history, longest account age, total balances, credit checks)
I just don't want too many idle accounts open with literally 0 utilization, nor do I want to put in the effort to minimally utilize all of them.
Why does closing credit cards hurt your credit score, all things considered?
byu/Specialist7545 inCreditCards
Posted by Specialist7545
4 Comments
Closing cards makes your utilization worse, not better. Since utilization is a percentage (total balance/total available credit), closing a card will decrease your available credit but doesn’t change your total balance
Closed accounts stay in credit history for 10 years so your AAOA doesn’t get hit immediately, but when they fall off later your score will drop if those were some of your older accounts
This is way overblown beyond belief. First, there is *zero* direct penalty in standard FICO scoring from closing cards. None at all. Aside from the scenario of having *no* revolvers, any effects are indirect.
As far as the indirect effects go, this mainly centers around utilization. Of course, utilization has no memory (again, in the most standard FICO scoring) and doesn’t matter whatsoever beyond the next few weeks. It’s also completely controllable, as in you can literally structure payments to report whatever utilization you want. In no way does regulars utilization have any impact on foundational credit building.
People also complain about average age of accounts. Indeed, closed accounts in good standing age on your report for 10 years. The scoring benefit from AAoA stops at 7.5 years. Do the math.
If you’re struggling with managing a bunch of cards, just close the ones you don’t use and don’t give it a second thought. It’s insane that people advocate for working so hard to unnecessarily keep cards open, just to have them be a vector for potential fraud, forgotten charges/payments, etc.
Closing a card only has a negligible, indirect effect on FICO scoring due to potential increases in utilization with less available credit. Having said that, utilization isn’t really something you should worry about, either.
Close ’em if you want. But why do it proactively? Just stop using them and wait for them to close it. That doesn’t harm you and it could be a year or more. I once had an unused Chase card open for 5 years with no activity at all until they closed it.