Closing Department Store Cards Hurt Credit?

[jtonya02]

I heard that it can hurt your credit if you close department store charge cards. Is that true?

[curtisports2]

It can but it doesn't necessarily have to.What hurts you is raising your percentage of debt to available credit. Closing zero-balance accounts can do that.Let's say you have a Visa with $10,000 limit and a $2,000 balance and a Master Card with a $10,000 limit and a $3000 balance, plus three department store accounts. One has a limit of $5K and $1,000 balance, the other two you rarely use and have combined limits of $10K and zero balance.To sum up: Your total credit limit is $35,000 and you're using $6,000, or 17 per cent of it.You decide to pay off the card with $1,000 on it and close it, because that has the highest rate and you can use your two main cards at that store anyway. This won't hurt you, as your limit shrinks to $30K but your balance shrinks also, to $5K, and your debt to limit ratio actually goes down a fraction. But if you decided to also close the two inactive accounts, your limit goes down to $20K, but your debt stays the same at $5K, and you are suddenly using 25 per cent of your available credit. FICO doesn't like that, and your rating may take a small hit.

[frissy]

That only matters if you plan to borrow money. In fact, your FICO score only matters as long as you plan on playing with snakes.