BiggerPockets

Why do I have a feeling another first time poster will answer your question very soon?

Good advice Josh, which is why I'm going to keep this post. The poster turned out to be yet another SEO guy hoping to capitalize on the site, but he won't be doing that now.

Feel free to continue discussing the topic . . .

Originally posted by Jon Klaus

Josh, does it help to cancel credit cards that you are not using and have no plans to use?

This can go both ways; sometimes it hurts to cancel a credit card, and sometimes it helps.

An example of when it would hurt is: Say you have a credit card that is one of your oldest items being reported on your credit, and that you have managed it well over the years. And that you never charge it to more than say 60% of available limit. DO NOT CANCEL that type of card, since it gives you a very good credit score.

An example of a card you might want to cancel: Departmnet store, with very low limit.

Also, you have to keep in mind that the scoring systems are based on how much you have charged with respect to your overall limit. If you cancel a card that has been paid down, you are just lowering your overall limit, so this would not be good (except maybe if you don't owe on any other debts - unlikely).

One thing that I hear has been happening is that folks are having their credit card limit lowered, while they have an outstanding balance, and then that balance with respect to the new limit exceeds 50% of available creidt. That hurts the score, and not much you can do about it unless you can get the old limit back.

steve is right on target. it can go either way. his examples are great examples.

i had a jc penneys card for many years, it was a crappy card that i got in college and had a whopping 1500 limit. i closed it an my score went up.

i have a card with wamu (my former employer), after i left, they jacked up my apr and i told them that i will never use that card again. i've had it for about 5 years and a limit of i believe 10k. if i were to cancel it, my AVAILABLE credit would be decreased by 10k on my credit report. that could hurt me. it's work it for me to just not carry a balance.

also, if you do have a card and you want to keep it open, but not use it--you may run into an issue. cc companies are now closing out inactive accts left and right. it varies lender to lender what is deemed as 'inactive', but i have seen most at about 1 year. if you want to keep a card active, i'd strongly suggest making a purcahse atleast once a year and paying it off.

Originally posted by Josh Green

also, if you do have a card and you want to keep it open, but not use it--you may run into an issue. cc companies are now closing out inactive accts left and right. it varies lender to lender what is deemed as 'inactive', but i have seen most at about 1 year. if you want to keep a card active, i'd strongly suggest making a purcahse atleast once a year and paying it off.

Some folks are recommending to use every card you want to keep at least once per quarter, so as not to fall into the "inactive" category as Josh has mentioned here. By "use" (for your low activity cards), I mean make some small charge and pay that off in full; don't carry balances where you don't have to.

As of today considering what credit card companies are doing now, it is best to use your credit card at least once every 3 months. BofA is going nutz canceling cards due to being inactive. All you need to do is generate a statement and you will be fine. I have 3 cards and i rotate through them with 1 in my wallet and 2 in my desk draw.

Somebody mentioned that a bad thing to do is buy something expensive. Thats not true, completely anyway. If your talking about a 5 MM mortgage, yes it will hurt a bit because it's not "normal" within the FICO system but the most "impressive" i saw was a guy who had just over 200k in credit card debt. His score was a 718. He had over 500k in available credit :o That is a personal record! haha.... When it comes to your DUR (debt utilization ratio) remember that it has nothing to do with the dollar amount and everything to do with the ratio.

Hope this helps, you guys have great questions.

Frank