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Is it bad for my credit history to cancel my department credit card for my case?

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  • Jul 1st, 2011 10:02 am
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Deal Addict
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Mar 7, 2008
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Is it bad for my credit history to cancel my department credit card for my case?

So I have a department store credit card with $10K credit limit.

I made a big purchase using the card ($10K) with zero percent interest for 20mths.

I have pay it all off within 6months!

Do I keep the card or cancel it? Is it true that it is actually better (credit history wise) for me to keep it as I have successfully paid it off?
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Jun 23, 2009
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YUL
It's a department store credit card. What rewards does the thing have? Unless you plan on making another similar purchase in the next year you should just dump it.
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Mar 7, 2008
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What about keeping a good credit history and lower the credit limit? No, is not likely I will use that department CC again.
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Jun 23, 2009
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YUL
THINKPADT61 wrote: What about keeping a good credit history and lower the credit limit? No, is not likely I will use that department CC again.
Having a good credit history is not dependent on keeping a single useless dept store credit card. Keep it if it makes you happy, but you don't need it.
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Jun 25, 2008
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I thought the beacon takes diversity of credit into account and meant it was good to have a non-major credit card, especially if the balance was zero.

I'd wait for others to chime in before just taking one person's advice.
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CRAZYBUBBA wrote: Having a good credit history is not dependent on keeping a single useless dept store credit card. Keep it if it makes you happy, but you don't need it.

Dont get me wrong, i dont need or want the department store card, but if it is good for credit history, i am for keeping it. If not, I am cancelling it. Anyone familiar with how credit history works?
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Aug 18, 2005
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Burlington-Hamilton
Close it. Most likely you have other credit cards that are older. This new one reduces the average age of accounts and will hurt your score for some time. If your percentage utilization of all the other cards is low, this one won't help much.

Also, I am not a big fan of department store credit cards - make sure you read all the fine print on your 0% offer because you could get screwed in one way or another. They are hoping you get tricked or don't pay it off! For example, one trick that has been used is that the payoff date is the date of the transaction, but the largest and most prominent date on the receipt is the delivery date.
- casual gastronomist -
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icic, if that's the case, i will likely cancel it once it is paid off.

thx
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Jan 4, 2011
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London
Keep the card! Even if you don't use it, it is still active credit, which is good for your score. By closing the account, that credit history (which sounds good since you used it for a big ticket item and then paid it off) will disappear from your credit report. Also, with a 0 balance but high limit, that helps your utilization measurement which can help your overall credit score too.
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Jun 23, 2009
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MikeMontrealer wrote: I thought the beacon takes diversity of credit into account and meant it was good to have a non-major credit card, especially if the balance was zero.
Diversity of credit meaning several different types of credit, ex: revolving credit (credit cards of all types), non-revolving (personal loans), car loans, etc
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Apr 1, 2011
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Niagara Falls
I would keep the card open for the history and diversity but reduce the limit. Having 10K available for a department store card seems high. A few years ago best buy closed my account because they switched credit issusers so keep that in mind it might close itself.
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Jun 6, 2009
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Jub3s wrote: Keep the card! Even if you don't use it, it is still active credit, which is good for your score. By closing the account, that credit history (which sounds good since you used it for a big ticket item and then paid it off) will disappear from your credit report. Also, with a 0 balance but high limit, that helps your utilization measurement which can help your overall credit score too.

Absolutely wrong.

Cancel the freaking card and get on with your life.
Sr. Member
Sep 15, 2005
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^ I agree (i.e., it won't disappear). You can read about it here, in an article based on answers from a FICO spokesman.
Jr. Member
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Nov 18, 2009
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The hard inquiry and balance for six months has done the damage. Now if you keep the card you will build positive credit history and score. Every six months buy a small item on sale and keep the card active.
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Jan 4, 2011
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epiphano wrote: Absolutely wrong.

Cancel the freaking card and get on with your life.
^ I agree (i.e., it won't disappear). You can read about it here, in an article based on answers from a FICO spokesman.
I've been working with credit applications and scores for about four years now. Part of my old job was to pull and review people's credit to determine if and how much we were going to lend the person. The credit history will disappear after 7 years, just like a bankruptcy or other marks, that's the credit history cut off. Yes that is a long time, but why not keep the card active and maintain the history? While it may not be a huge bump in his credit score, it's still going to affect him because he's just removed 10k off of his history. When we look at apps, we look at the total amount of credit a person has compared to how much of it they've used. By canceling a larger balanced card, that makes the debt to credit ratio go up, and it could look bad to some lenders. Not all are the same, and some places weigh things differently when lending, but it's something to keep in mind. Keeping the card around and using it for small purchases then paying it off is not a bad thing.
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Jub3s wrote: I've been working with credit applications and scores for about four years now. Part of my old job was to pull and review people's credit to determine if and how much we were going to lend the person. The credit history will disappear after 7 years, just like a bankruptcy or other marks, that's the credit history cut off. Yes that is a long time, but why not keep the card active and maintain the history? While it may not be a huge bump in his credit score, it's still going to affect him because he's just removed 10k off of his history. When we look at apps, we look at the total amount of credit a person has compared to how much of it they've used. By canceling a larger balanced card, that makes the debt to credit ratio go up, and it could look bad to some lenders. Not all are the same, and some places weigh things differently when lending, but it's something to keep in mind. Keeping the card around and using it for small purchases then paying it off is not a bad thing.

What if I can't keep using the card? Is a one time purchase and is a big one, that's it... I can't see myself spending money there again. So is it better to drop it for such case?
Sr. Member
Sep 15, 2005
585 posts
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Jub3s wrote: I've been working with credit applications and scores for about four years now. Part of my old job was to pull and review people's credit to determine if and how much we were going to lend the person. The credit history will disappear after 7 years, just like a bankruptcy or other marks, that's the credit history cut off. Yes that is a long time, but why not keep the card active and maintain the history? While it may not be a huge bump in his credit score, it's still going to affect him because he's just removed 10k off of his history. When we look at apps, we look at the total amount of credit a person has compared to how much of it they've used. By canceling a larger balanced card, that makes the debt to credit ratio go up, and it could look bad to some lenders. Not all are the same, and some places weigh things differently when lending, but it's something to keep in mind. Keeping the card around and using it for small purchases then paying it off is not a bad thing.
Thanks for your perspective, Jub3s. For a different perspective, I'll post that previously mentioned article here in convenient juxtaposition. As much as you're an expert on the subject, the article also has some authoritative credibility because it's based on answers from a FICO spokesman. People will find it interesting that the article says a lot of the same things that you've said, but reaches a different conclusion ("Keeping the card around and using it for small purchases then paying it off is not a bad thing" vs. "So if you want to chop up your credit card, start chopping. The downside is probably a lot smaller than you think").


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Don't sweat it: Canceling a credit card won't hurt your score
George Mannes, CNN Money
March 2, 2010

. . . But is this a real problem? Will indeed your credit score drop if you tell your card issuer to stick their plastic somewhere other than an ATM? Part of the problem is that the methodology of determining your credit score is a secret formula held by FICO, a.k.a. Fair Isaac, the company behind the most widely-used credit scoring system in the US. Yes, they do explain the ingredients of that formula in general terms. Getting the nitty-gritty numbers, however, is like asking Coca-Cola for their secret recipe: They'll admit it contains "natural flavors," but don't expect much more information than that.

Yet FICO was able to shed some light on the question. The most important point made by spokesman Craig Watts is that it's a myth that if you close a credit-card account, all trace of it disappears from your credit score. In fact, he says, the credit agencies from which FICO draws information used to calculate your score hold on to payment history for years -- the positive stuff for about a decade and the negative stuff usually for seven years. That information is used to calculate two parts of your credit score. One is payment history, which accounts for 35% of your score and which reflects, among other things, whether you made your payments on time and whether you welshed on any balance you may have owed when you chopped up your card. Another is length of credit history, accounting for 15% of your score, which reflects whether you're a newcomer to paying people back or not. All that stays, Watts says, if your card goes. You've read -- perhaps from well-meaning people on FICO's own message boards -- that you should never close your oldest credit card because your length-of-credit-history measurement will immediately plummet? Again, that's a myth, says Watts. (Dropping it might affect your credit score a decade from now, he grants, but the impact will be small potatoes compared to that of your credit-related behavior in the interim.)

Where you may get into trouble right now is in the "amounts owed" area, which accounts for another 30% of your score. One important element of that is what's called credit-card utilization -- that is, the size of the balances you carry on your credit cards as a percentage of the amount you could theoretically borrow on all your cards. Imagine, for example, that you have two credit cards with $5,000 limits on each, with a $500 balance on one and a zero balance on the other. If you close the zero-balance account, you've gone from using 5% of your available credit (the $10,000 total on your cards) to 10% (of the $5,000 on the remaining card) -- not a big deal in credit-card terms. In low-utilization situations such as that, closing an account should have virtually no effect on your credit score, says Watts. "No harm, no foul," he says.

But let's say instead that you have three $5,000-limit cards -- one with a $3,000 balance and the others with none -- and you drop your two zero-balance cards. In this case, your credit-card utilization rate will go from 20% to 60% -- a noticeable amount that will certainly ding your credit score. How much? Can't say, since we're back to the black-box credit-scoring system.

In any case, Watts says that if you already have a score in the upper half of the 700s or above -- that's about 40% of the population -- losing a few points shouldn't hurt you at all, practically speaking.

So if you want to chop up your credit card, start chopping. The downside is probably a lot smaller than you think.
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Deal Addict
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Mar 7, 2008
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All very good feedbacks and I really appreciate them!

I am happy to tell you guys that as of this morning, I have submitted my final payment and paid off my department store debit without paying any interest :)

I will go ahead and cancel the card base on the fact that history remains for years to come. I hated this card anyways...

By the end of September, I will have another car loan paid off (in fact, is not mine, I co-sign it. I am perfectly fine with co-signing in this case as I didn't need to borrow money during the 3yrs period). Once this car loan is paid off, I should have really good credit for a mortgage!!! quite excited.
vm_fan wrote: Thanks for your perspective, Jub3s. For a different perspective, I'll post that previously mentioned article here in convenient juxtaposition. As much as you're an expert on the subject, the article also has some authoritative credibility because it's based on answers from a FICO spokesman. People will find it interesting that the article says a lot of the same things that you've said, but reaches a different conclusion ("Keeping the card around and using it for small purchases then paying it off is not a bad thing" vs. "So if you want to chop up your credit card, start chopping. The downside is probably a lot smaller than you think").


- - - - - - - - - -
Don't sweat it: Canceling a credit card won't hurt your score
George Mannes, CNN Money
March 2, 2010

. . . But is this a real problem? Will indeed your credit score drop if you tell your card issuer to stick their plastic somewhere other than an ATM? Part of the problem is that the methodology of determining your credit score is a secret formula held by FICO, a.k.a. Fair Isaac, the company behind the most widely-used credit scoring system in the US. Yes, they do explain the ingredients of that formula in general terms. Getting the nitty-gritty numbers, however, is like asking Coca-Cola for their secret recipe: They'll admit it contains "natural flavors," but don't expect much more information than that.

Yet FICO was able to shed some light on the question. The most important point made by spokesman Craig Watts is that it's a myth that if you close a credit-card account, all trace of it disappears from your credit score. In fact, he says, the credit agencies from which FICO draws information used to calculate your score hold on to payment history for years -- the positive stuff for about a decade and the negative stuff usually for seven years. That information is used to calculate two parts of your credit score. One is payment history, which accounts for 35% of your score and which reflects, among other things, whether you made your payments on time and whether you welshed on any balance you may have owed when you chopped up your card. Another is length of credit history, accounting for 15% of your score, which reflects whether you're a newcomer to paying people back or not. All that stays, Watts says, if your card goes. You've read -- perhaps from well-meaning people on FICO's own message boards -- that you should never close your oldest credit card because your length-of-credit-history measurement will immediately plummet? Again, that's a myth, says Watts. (Dropping it might affect your credit score a decade from now, he grants, but the impact will be small potatoes compared to that of your credit-related behavior in the interim.)

Where you may get into trouble right now is in the "amounts owed" area, which accounts for another 30% of your score. One important element of that is what's called credit-card utilization -- that is, the size of the balances you carry on your credit cards as a percentage of the amount you could theoretically borrow on all your cards. Imagine, for example, that you have two credit cards with $5,000 limits on each, with a $500 balance on one and a zero balance on the other. If you close the zero-balance account, you've gone from using 5% of your available credit (the $10,000 total on your cards) to 10% (of the $5,000 on the remaining card) -- not a big deal in credit-card terms. In low-utilization situations such as that, closing an account should have virtually no effect on your credit score, says Watts. "No harm, no foul," he says.

But let's say instead that you have three $5,000-limit cards -- one with a $3,000 balance and the others with none -- and you drop your two zero-balance cards. In this case, your credit-card utilization rate will go from 20% to 60% -- a noticeable amount that will certainly ding your credit score. How much? Can't say, since we're back to the black-box credit-scoring system.

In any case, Watts says that if you already have a score in the upper half of the 700s or above -- that's about 40% of the population -- losing a few points shouldn't hurt you at all, practically speaking.

So if you want to chop up your credit card, start chopping. The downside is probably a lot smaller than you think.
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