Dear Dr. Don,
I've had a certain credit card company for almost 20 years and have been very happy with it. Recently, I was notified that another company bought them out. I don't like this new company at all and, in fact, I canceled an account with them years ago.
Should I cancel the card even though I've used it for about 18 years? Everything seems to be changing with the card. They even sent me a new credit card with the name of the company I don't like on the front. It is a slow, systematic changeover, and already the new company is not being honest. Please tell me what to do.
-- Switcheroo Blue
I'm a strong advocate of voting with your feet when you don't like a company's products or services. In other words, leave. That's especially true when it comes to money matters and you don't think the firm is being honest with you. Still, before you cancel the card, I'd like you to take a couple of steps to make sure that closing this account isn't going to have a negative impact on your credit history.
Lenders use your credit score along with other factors, such as your income and banking relationships, to determine whether they want to extend you credit. Your credit score is based solely on the information in your credit report. One factor in your credit score is the length of credit history. According to
myFICO.com, the length of credit history is roughly 15 percent of your credit score.
|Credit score factors:|
The length of credit history looks at how long the accounts have been open, individually and by type of account, and the time since the last activity in an account. It looks at open accounts. If you close the credit card account, the payment history will continue to show up on your credit report, but the closed account's payment history won't go into the mix for your credit score. It also changes the ratio of amounts owed to credit line available. That's why myFICO.com doesn't recommend closing accounts as a short-term strategy to improving your credit score.
My recommendation is for you to pull copies of your credit report from the three principal credit bureaus: TransUnion, Experian and Equifax. They're free if you haven't used up the one free report from each that you're entitled to every year. The Bankrate feature, "
How to get your free credit report," explains how to get those free reports. Review your reports and get a sense of your credit history without this account in the mix. If you want to know your credit scores from the bureaus, you'll have to buy them, but Bankrate has partnered with myFICO.com to provide a free
FICO score estimator.
If you don't have many open accounts other than this credit card you should consider holding on to it as you develop a credit history with another credit card provider. At a minimum, you want to keep the account open while you're shopping for its replacement.
Don't fill out multiple applications, because every time you do, the application shows up on your credit report. Multiple applications are red flags to lenders and work against you getting approved for credit. The applications create an inquiry on your report that stays there for two years and is considered in your credit score for the first year.
Instead, you should shop credit card providers using Bankrate's
credit card search to find a card that has the features you want in a credit card.
To ask a question of Dr. Don, go to the "
Ask the Experts" page and select one of these topics: "financing a home," "saving & investing" or "money."