Just a 46-year-old mom of 2 in Northern California. My kids are Monkey Monkey(MM) and Drama Llama (DL). I am married to Monkey Hubby (MH). Okay, I decided to close my WAMU card TODAY, so on a whim I checked one last time to see if my February FICO score had posted. I didn't expect it but figured I would check. I was closing the card because free FICO no longer offered as of March or something, but since that announcement they seem to have stopped updating the free FICO. It usually updates monthly.
I just posted I was particularly bummed because I closed a card around Jan. 1 and I was curious how this closure would affect my FICO in the short term. I knew from past experience it wouldn't amount to a hill of beans in the long run.
So imagine my surprise today to not only see my FICO score, but to see post card closure (the big no no of the FICO world!) that my score had shot up 30 points, to 825.
Um, yeah.
In fact, paying off all my balance transfers had about the same effect. My score shot up 30 points then too.
But besides that, nothing has affected my score much the last 18 months.
Quite clearly the card closure did it. I only closed about $10k of credit. My credit reports all show $20k available credit now. Will be $14k when I close this other (balance transfer) card. So it's not like I have TONS of available credit or anything. But on average we only utilize about $2k/month.
The only other thing of note is my new mortgage.
But no matter what all the gory details are, clearly I am no worse for the ware in the short term, for closing an unused credit card.
For the long run I know it doesn't matter. I always close my old credit cards (oldest one - 3 years old?) and I have pretty much always had a FICO over 800.
I always figured that whole thing was blown out of proportion, but now I know for sure it's just a myth.
Caveat: In certain circumstances it is certainly better to keep old cards open.
BUT if you have a decent credit score and you think the world will end because you close an old card, eh, get over it. That's what I say!
& I have to tell you, I was shocked to see that giant blip upwards as I was expecting one in the opposite direction.
If nothing else, just to re-iterate, no one fully understands FICO.
Simple common sense has worked for me.
Caveat: Though none of my current credit (credit card or mortgage) I have more than 5 years, I do have 15 years of credit history. I have a mortgage and 2 credit cards. My score has been in the 800s since around 2000. If you are in a similar situation don't let the credit industry bully you into keeping open unused credit cards. Trust me, they are often more problem than they are worth with the rise of ID theft and such.
MYTH; Keep Credit Cards open to improve FICO
February 17th, 2009 at 03:27 pm
February 17th, 2009 at 03:49 pm 1234885757
I'm quite jealous of that FICO! Mine runs in the low to mid 700s, as the Wamu site said, because of too much debt and making only minimum payments. One thing I have started doing is to pay more than the minimum. Just a little more is all I can afford, and I looked unsuccessfully for the answer as to how much more I need to pay to make a FICO difference. As you say, it stinks that FICO is so cloaked in mystery.
I'm guessing your situation is because your debt to available credit is still small. For those of us with big balances (albatrosses), it will probably hurt much more to close accounts, and I believe that's the reason Suze Orman recommends against it.
It's very interesting how the current financial situation will affect FICO. For instance, CC companies now WANT you to close open lines of credit to limit their liability, now that all the horses are out of the barn. But large limits are supposedly good for FICO, so now high FICO is not all the banks want, so will Fair Isacc make changes? Or will efforts by the Big 3 Cridit Agencies to have their own score to replace FICO gain traction? Just recently BoA closed a few inactive ones FOR me because "you have sufficient debt". THAT's pretty mild wording! WAY TOO FRIKKIN' MUCH is the more accurate, non-PC term!
Anyway, good post, thanks, and congrats on that awesome score!
February 17th, 2009 at 04:33 pm 1234888424
That reminds me - the credit industry does perpetuate other myths about FICO. We have never carried a balance on our credit cards, had an auto loan, or anything like that. People will tell you that you have to carry a balance to build credit. & that you HAVE TO have an auto loan to build credit. BS! That is most definitely false. Paying off your cards every month is the same as carrying a small balance, as far as your credit score.
For us, ever since we had a mortgage, our FICO has been sky high.
February 17th, 2009 at 05:12 pm 1234890737
February 17th, 2009 at 06:11 pm 1234894295
That being said Ima Saver, I thought you said your score was 800+. I mean it can't be hurting that much.
February 17th, 2009 at 07:09 pm 1234897765
February 18th, 2009 at 04:24 am 1234931098