Get smart with your money
Dear Liz: Does the reason for a credit card closure affect credit scores? I’ve had retailers close a card simply because it hasn’t been used for a period of time, not because I mishandled the account.
Answer: Credit score formulas don’t distinguish between accounts closed by the consumer and accounts closed by the issuer. The closed account can still ding your scores, but you won’t suffer an extra blow because the decision to close wasn’t your own.
Today’s top story: Identity theft protection you may not know you already have. Also in the news: How auto insurers use you non-driving habits to raise prices, how younger consumers can get a credit boost from their elders, and how to close a credit card the right way.
Identity Theft Protection You May Not Know You Already Have
Some surprising sources.
How Auto Insurers Use Your Nondriving Habits to Raise Prices
What you need to know about price optimization.
Younger Consumers, Get a Credit Boost From Your Elders
Authorized user status could give you a boost.
How to Close a Credit Card The Right Way
Protecting your credit score.
Dear Liz: Over the years, my husband and I have accumulated a number of credit cards. All have had a zero balance for years. I want to start canceling these cards, but I’m concerned that will hurt our great credit scores. How should I go about this, or should I?
Answer: As you probably know, closing credit accounts won’t help your scores and may hurt them. That doesn’t mean you can never close a credit card, but you shouldn’t close a bunch of them at once or close any if you’ll be in the market for a major loan, such as a mortgage or auto loan.
If you’re not planning to borrow money in the near future, then you can start closing accounts one at a time. You’ll probably want to keep the cards with the highest credit limits, and perhaps your oldest card as well. Monitor your scores to see how long they take to recover from each closure. You may need to wait a few months before shutting the next account.
Be sure to use your remaining cards occasionally by charging small amounts and paying the balance in full. That will keep the cards active and help prevent the issuer from canceling them.