Credit Card Consolidation Impacts Credit Score

Added December 19, 2008 by Ilyce R. Glink

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Summary: Does it hurt your credit score if you close credit card accounts? Credit bureaus monitor how long you've had each credit card in determining your credit score so closing a long-held credit card could have a negative impact. But if you're generally responsible with your credit cards by paying them off every month and thus not carrying a balance your credit score may not drop significantly. It's important to know your credit score when you're applying for a home loan.

Q: I'm a 56-year-old widow. I have good credit and I plan on selling my home and buying a smaller home next year. I have recently gone through and closed all my open but unused credit cards, including a department store charge and two Visa cards. I was thinking this would look better on my credit report when I seek a new mortgage.

But my friends are telling me that I've done the wrong thing. They say I should have left these accounts open. Is this true?

The only debt I have is my mortgage and line of credit. I use three major credit cards regularly, mostly for the benefits like cash back, and all are paid off at the end of the month.

Am I on the right track?

A: With so much confusing information out there about fixing your credit history and raising your credit score, it's no wonder that getting caught in the cross breeze.

While much of your credit score depends on your available lines of credit, you can cancel some cards as long as the credit accounts you leave open are your longest-standing accounts. You get a bump to your credit history and score the longer you have been able to successfully manage your accounts.

For example, I have a credit card account that has been open for 20 years. I don't carry a balance on that account (or on any of my accounts), and I wouldn't close it because it is my oldest piece of credit. On the other hand, I have a few store credit cards that I could close and not take much of a hit on my credit history and score simply because this 20-year account is still active.

If you've canceled your oldest accounts, then you may have caused some damage to your credit history. But if the three credit cards you use are your oldest accounts, you probably haven't hurt your credit history or score at all.

Read Your Credit History Here's one way to tell: Go to AnnualCreditReport.com and pull down a free copy of your credit history (you're allowed at least one free report from each of the three credit reporting bureaus each year). At the same time, you should opt in to purchase a copy of your credit score from Equifax for less than $10. The Equifax score is most closely tied to the credit score used by mortgage lenders.

If you're thinking about applying for a mortgage or home equity line of credit this year, you'd want to pull a copy of your credit history and score anyway, so this is a good time to do it. Once you have them, check your credit history carefully for errors to be sure that there's nothing else that's pulling down your credit score.

From what you've written, my guess is that you'll be pleased with what you find on your credit history and the corresponding score. The best thing you have going for you is that you're paying all of your bills in full and on time each month. This goes a long way toward giving you a solid credit history and score.

You can't reopen accounts you've already closed, but if you pay your bills on time and in full each month and maintain your oldest credit accounts -- even if you don't carry balances on them -- your credit history and score should stay in good shape.

Published: Dec 19, 2008

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