I've been working on paying down my credit card debt and in the process realized that I still have some store charge cards open that I haven't used in years. There's no balance on them and I don't shop at the stores anymore. I want to close them but have heard that this will negatively impact my credit. Is that true? Do store charge cards impact my credit score?
Hi - First, you should obtain a current copy of your credit report. You can get a free copy at www.annualcreditreport.com. There are three credit reporting agencies and it doesn't make a great deal of difference since they report that same information, but I find the TransUnion reports easier to read. Verify that the accounts are still reported as open - some of them may have been closed by the issuer. There is no hard and fast rule about closing old accounts, but here's what I tell clients. Calculate your total open credit lines - i.e., what is the total dollar value of all of your credit card credit limits? Next, calculate your credit utilization ratio: divide the total you owe by the total credit you have available. Is that number below 30%? Don't close any old open accounts if your utilization ratio is above 30% - your credit score will most likely decline. How old are these credit accounts? They may be your oldest accounts and closing all of them at once will shorten your credit history which can also cause your score to decline. To sum up you want to make sure your utilization ratio is below 30% before closing old accounts and you want to make sure you aren't significatnly shortening your reported credit history. There are several on-line tools you can use to help you with this: www.creditkarma.com is a site run by TransUnion that has proven useful and it's free. Good luck!