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Can I close this useless store credit card?

 
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August 27, 2013
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QDear Erica,

The only credit card that I ever had is a Burlington Coat Factory credit card. I opened it more than six years ago when I lived in the Miami area. It was a great store, as I always found deals. I paid my bills right away so I never paid any interest. I recently moved, and there is no Burlington here so I can't use my card unless I shop online, and I don't like to shop online for clothes. Should I close the card and get one for a store in my new town? Or should I leave it open? I don't want to hurt my credit. – June

ADear June,

It does seem ridiculous to maintain a dormant, unnecessary account, doesn't it? If you weren't interested in getting another credit card or keeping your credit scores high, I'd say go forth and shut the thing down. But since you do want those things, I suggest that you keep it alive for at least a little while longer. You've got six years of borrowing and repaying behind you. Let it shine!Ask Erica

You see, while you're in the credit application stage, having an active and well-managed account will work in your favor. Large retailers will want to know how you've been managing that Burlington Coat Factory credit card before they approve you for a new card of theirs.

A long, clean history with an account that's still active will certainly be factored in, and in a positive way. Closing it won't erase your actions (accounts paid as promised stay on your credit reports for 10 years), but recent activity matters more than old activity. So I recommend keeping this card alive at least until you've secured a replacement.

Because credit history and credit scores are so relevant to lenders (the other primary influence is income), find out what yours are before submitting any credit applications. Though it appears you've handled this particular account with aplomb, you may have other debts that you didn't mention, such as student debt, a home mortgage, car loans or even collection accounts. All will have an impact on your numbers, so get a copy of your credit reports from the three major credit bureaus (Experian, Equifax and TransUnion). Those are free once a year from AnnualCreditReport.com. Then, clear up any problems that you see on your reports, and pull your FICO scores from myFICO.com for about $20 each.

You should always know where you stand before submitting a credit card application. This way you won't over or undershoot your chances. Each time a potential creditor checks your credit, you end up with an inquiry on your reports. Too many inquiries that result from a request for credit (such as a card application) can temporarily lower your credit scores, so you don't want to apply recklessly.

An excellent FICO score is in the mid-700s and above, and if yours is there and you have a job that offers a steady and healthy income, wonderful. Chances are good that you'll be eligible for a different retail card at a place in your neighborhood. Keep in mind that smaller retailers may not offer credit at all, though the larger chains nearly always do. Find one you like and apply. After you've been issued a card, feel free to say goodbye and thanks for the memories to Burlington.

There's one last thing I want you to consider as you're thinking of adding a fresh card to your wallet: Do you truly want to stick with just a retail card? You may want to look into a general purpose rewards credit cardthat you can use anywhere. There are cards out there that give you cash back for all your purchases, or travel points that you can cash in for a free flight or hotel stay. That way you don't have to start fresh each time you move far from the physical location of the store that you love — and you'll still get discounts and other goodies.

Got a question for Erica? Send her an email.


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