I learned a lesson this week. I hate learning by experience.
I got a letter in the mail that a credit card I’ve had open for five years, with a substantial limit on it, got closed for inactivity. Now, I know that I should use my cards at least once a year, but this one totally slipped my mind.
I’m not looking forward to seeing what this does to my credit score. I don’t carry a balance on any of my cards, so my debt at any reported time is low, but my credit limit on all my cards was high. This cancellation has very much decreased my debt to credit ratio.
I’ve been considering opening a new card, finding one with some great benefits I would like to use. I guess now is the time to start my research.
I will probably also call Discover and see if they will increase my credit limit. Not that I will ever spend near it, but it would be good to have an increased amount of credit.
So everyone, if you have cards you don’t use and don’t want to see them closed, go buy some gum with them!
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.
The same thing happened to me recently!! I was so mad!
As far as the debt ratio, this shouldn’t really affect it. At my bank, we go by how much credit you have in use versus your income. If anything this would help because you don’t have it available to spend. I think the biggest thing that will affect your credit score is that you now have closed a line of credit that you’ve possibly had open for years. I think it’s crappy about credit card companies, but what can you do? They should at least ask first, I think! 🙂
I think it dings your credit score a little bit and of course affects your credit to debt ratio, but your score will pick up again in a couple of months.
No need to worry. It’s a good ding 🙂
It doesn’t make sense to me why your credit would be affected in that way. It’s stupid. Why do they do that?
I wouldn’t worry too much about it, though. I’m sure your credit will bounce back in no time.
yep, happened to me, too. The worst of it is that this is the card that I’ve had the longest. So it didn’t only ding the ratios, but the length of history, too.
I HATE the whole FICO thing. My son pays higher car insurance rates because he hasn’t ever had a credit card. And he doesn’t want one, but may be forced into this game just because it’s the only one in town.
I always have to remind myself to use my oldest credit card.
I recently opened a Chase Freedom card and I love it. I’ve already gotten $50 in cash back, plus if I really want to I can use my points for something else.
Ouch, yeah, your credit might be dinged for a while. That sucks!
Funny you should post this today – just this afternoon I got out my emergency credit card and used it to buy a couple of pairs of gloves (that I needed anyway), just to keep it active. I haven’t used it for anything since January 08, I think, so it was time.
couldn’t agree more! use them credit cards every now and then. i just got a notice that our APR went up because there’s now a minimum of 6% being applied as the lowest you can pay….kinda sucks, but just gotta keep making sure no balances stay on there 😉