When I left for college in 2003, my mom signed me up for my first credit card. Since I was going to school in San Diego, but my family was in Seattle, the thought was I could use this credit card if I ever needed to purchase an emergency plane ticket home. Fortunately, I never had to use the card.
Fast forward to last week. I get a letter in the mail from Chase. The letter informs me my account is going to be closed, citing a lack of activity over the last two years as the reason. At the very bottom of this two page letter there is a short blurb providing contact information to appeal the closure.
Normally I wouldn’t care. They can close my account. I don’t use the card, keeping the account open costs them money (albeit probably a negligible amount), and I don’t have any other accounts with Chase. But, even though I have no desire to ever use this credit card I really wanted them to keep the account open.
We want to buy a house. When we were pre-approved for a mortgage last month, we found out my credit score is 750, Girl Ninja’s 790. Since my credit score was slightly lower, banks would be using my score to determine what rate they would give us for a loan. Higher credit score’s get better rates. For reference, my 750 score is on the low side of “very good”.
The Chase credit card I mentioned above is my oldest standing credit account. Did you know one of the determining factors in the credit score calculation is length of credit history? It makes sense, someone who has a ten-year track record of paying off debt on time, is probably more “safe” than someone who only has a six-month track record.
If my Chase account closed there is a very real possibility my credit score could drop to 730 or even 700.
This bumps me out of the “very good” credit standing and puts me in the “good” category. Theoretically a bank could decide to give us a slightly higher interest rate since we are no longer seen as “top-tier” loan applicants. Moral of the story, let an account close, pay thousands more in interest over the course of a mortgage. How lame is that?
If we weren’t currently in the house hunting process I’d be totally cool letting the account close. Aside from this pesky mortgage, I have no plans to borrow money, and therefore could care less about my credit score. Unfortunately, it is the standard and having a great score makes life significantly easier.