Credit score may take a hit when credit cards are canceled
A. For you, the hit should be minor and temporary. Still, there are considerations to make before you cancel.
Ask yourself if you'll be applying for any major loans, such as a mortgage or car loan, in the near future.
"You might want to keep the card until that credit is obtained to get the best possible rate of interest on the loan," said Jody D'Agostini, a certified financial planner with AXA Advisors/RICH Planning Group in Morristown.
Take out any loans first because canceling your oldest card will have an effect on your length of credit history, which makes up about 15 percent of your credit score. Keeping the oldest card is good for that part of your score, but given the rest of your credit history, it sounds like you'd make up any decline rather quickly.
"The nick on your credit should be minimal, and as long as you continue to pay your bills in a timely fashion, then you should have little cause for concern," she said.
If there was no annual fee, D'Agostini said she'd recommend sticking the card in a drawer and not using it, though sometimes inactivity will cause the lender to close the line of credit.
Although you'd be closing your oldest card, you still have the Hilton card, which goes back to 1988 — not bad and certainly proof of a long credit history.
Something else to consider before closing the card is your credit utilization ratio, which compares how much credit you have available and how much you're actually using, said Michael Gibney, a certified financial planner with Highland Financial Advisors in Riverdale.
Gibney said closing the card will lower your available credit, and together with your outstanding auto and home improvement loans, your credit utilization will move higher — and higher in general is bad for your credit score.
This again, given your overall solid credit history, will be a temporary hit.
"I agree with canceling the gold card because of the annual fee," Gibney said. "I find it hard to justify an annual fee on a credit card because there are many offerings available with no annual fee."
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