The Moneyologist: How do I cancel 10 credit cards without damaging my credit rating?

What to do when you have a super-demanding boss
August 19, 2017

Dear Moneyologist,

I became ill suddenly and had to retire at 62. When I was divorced at 45 I had nothing. I re-grouped, saved, saved and saved, put two kids through college and rose through the ranks at work.

When I retired, I had two decades of expenses in an emergency fund (it is still there), zero credit-card debt and have lived very frugally on my small pension and Social Security Insurance since then. When I was making six figures at work, I took out credit cards for miles, rewards etc.. I have quite a few. Because I’m not using them, I’m getting yearly fees (I have about 10).

I need to cancel these accounts since I’m wasting $1,000 a year in credit cards fees, which can be sinful to me. However, most men and women say cancelling the cards will affect my FICO score. My FICO score is 780 and the notes on the credit-card report said high limits on multiple cards is a drawback. I need to cancel these cards with the large limits and save the wasted fees.

How can it really affect my FICO?

Linda

Dear Linda,

This isn’t the time to worry about your credit score. Presumably, you aren’t carrying out a mortgage, and you’re in good enough financial shape to not need to take out a loan for a car or any other big ticket item. Even if your credit score did take a small hit after canceling a rake of cards — which isn’t a given — you would bump it back to the former level by maintaining your balance low (relative to your maximum overdraft) and paying your bill on time.

That said, closing an account with no balance and no late or missed payments will stay on your credit score for around 10 years, according to credit-card comparison site CreditCards.com. This continues even longer than the seven decades of black marks will stay on your credit history but closing the accounts does not affect your score. It is sensible to close the more recent accounts first, since they have a shorter credit history. Request written confirmation and, of course, redeem your points first.

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One-third of people do not realize that they have more than one credit score. The country’s three main credit bureaus — Experian, Equifax and TransUnion — gather the information on which credit scores are frequently based. Some lenders may be unwilling to take just one credit score, if they suspect that it does not represent the complete picture. And scores can fluctuate. In 2014, Fair Isaac Corp. (FICO) announced a change in its scoring, putting less focus on medical-related debts.

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Other good news: As of July 1, Equifax, Experian and TransUnion, started a new policy which will raise about 12 million consumers’ credit scores. On this date, the agencies began collecting more specific information about the public records which are included on credit reports, including bankruptcies, civil judgments and tax liens — which means customers will not be penalized as severely as they formerly were for all those black marks on their credit histories.

How much credit you use is just as important, if not more so, than the amount of available credit. The Moneyologist Facebook Group also has advice for you, highlighting the fact that you will pay $10,000 in yearly credit-card dues over the next 10 years alone. Think what you could do with that money. Call the credit-card business and change to a no-fee card (or simply cancel it). Another member suggests closing one a month. (Or even two a month.) Don’t be a slave to your credit score.

You’ve already proven you’re smarter than that.

Do you have questions about inheritance, tipping, weddings, family feuds, friends or some other tricky issues concerning manners and money? Send them to MarketWatch’s Moneyologist and please include the country in which you live (no full names will be used).

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Hello there, MarketWatchers. Take a look at the Moneyologist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas: inheritance, wills, divorce, tipping, gifting. I often talk to attorneys, accountants, financial advisors and other experts, in addition to offering my own thoughts. I receive more letters than I could ever answer, so I will be bringing all of that advice — including some you might not see in these columns — to this group. Post your questions, tell me what you would like to know more about, or weigh in on the most recent Moneyologist columns.

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