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Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:09 pm
by DTalos
I plan to cancel a credit card I have had for 20 years because the annual fee doesn't provide a good cost-benefit for me, and the company refuses to waive it. I cannot downgrade to a no-fee card with the same company. This is my only credit card. I have read conflicting information on how severely this will impact my credit score and hence my auto/home insurance rates when it comes time to review. I have been with the same insurance carrier for decades if that matters. What have been your experiences with cancelling a long-term credit card and how it affected your credit score relative to auto/home insurance rates? I absolutely do not care about obtaining a loan or mortgage in the future, since I never will. How long (in years) will my credit score be negatively affected by closing my one and only 20 year credit card?

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:16 pm
by dodecahedron
My oldest credit card (44 years old!) got cancelled (due to inactivity on my part) about a year ago. The cancellation had no noticeable impact on my credit score. But then again, I had a long history with lots of other credit cards, many of them held for over 10 years. The average age of my accounts was still quite respectable.

Also, as I mentioned before, in my state (NY), insurers are only allowed to use credit info in negative ways when determining the initial rate. They can´t hold a change in my credit score against in determining my renewal rate. So I wasn´t too worried. I am happy with my existing insurance company and they have not raised my rates since I started with them six years ago. In fact, my rates have gone down. (But then again, I dropped collision & comp as my cars got older.)

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:25 pm
by whodidntante
Diversity of credit is a factor, so it will hurt. Average age of accounts will not drop until the old card falls off your credit report. I think that happens in 7 years. Go get yourself a credit card with no annual fee.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:26 pm
by FIREchief
DTalos wrote:
Sat Oct 12, 2019 6:09 pm
I plan to cancel a credit card I have had for 20 years because the annual fee doesn't provide a good cost-benefit for me, and the company refuses to waive it. I cannot downgrade to a no-fee card with the same company. This is my only credit card.
Are you planning to not have any credit card going forward?? :confused

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:28 pm
by RickBoglehead
Formulas are proprietary.

https://www.creditcards.com/credit-card ... e-1586.php

https://www.nerdwallet.com/blog/finance ... t-history/

Your insurance score is impacted by your credit score. Again, proprietary.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:30 pm
by DTalos
FIREchief wrote:
Sat Oct 12, 2019 6:26 pm
DTalos wrote:
Sat Oct 12, 2019 6:09 pm
I plan to cancel a credit card I have had for 20 years because the annual fee doesn't provide a good cost-benefit for me, and the company refuses to waive it. I cannot downgrade to a no-fee card with the same company. This is my only credit card.
Are you planning to not have any credit card going forward?? :confused

I plan on waiting for a bonus offer (maybe there will be one on Black Friday LOL) on a no annual fee cash back card. I can go without a credit card for a couple months.

The card I have that I want to cancel has a negative balance (meaning I overpaid last months statement) so I don't know whether to use up the credit or have them mail out a check for the negative balance.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:31 pm
by DTalos
RickBoglehead wrote:
Sat Oct 12, 2019 6:28 pm
Formulas are proprietary.

https://www.creditcards.com/credit-card ... e-1586.php

https://www.nerdwallet.com/blog/finance ... t-history/

Your insurance score is impacted by your credit score. Again, proprietary.

Being propriety, there is no way to truly know any impact correct?

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:33 pm
by iamblessed
I closed my oldest card and opened a new one at the same time. My score dropped around 25 points. So if you are ok with that drop go for it. I had a 795 score at the time and it was back up in less than a year. I am guessing that if you can keep your score above 760 it is not a big deal. Another thing you can do is to do it right after your insurance renews that way your score has a year to recover.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:33 pm
by RickBoglehead
DTalos wrote:
Sat Oct 12, 2019 6:31 pm
RickBoglehead wrote:
Sat Oct 12, 2019 6:28 pm
Formulas are proprietary.

https://www.creditcards.com/credit-card ... e-1586.php

https://www.nerdwallet.com/blog/finance ... t-history/

Your insurance score is impacted by your credit score. Again, proprietary.

Being propriety, there is no way to truly know any impact correct?
That is correct. Read the links. Removing a 20 year account will have a significant impact.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:35 pm
by RickBoglehead
iamblessed wrote:
Sat Oct 12, 2019 6:33 pm
I closed my oldest card and opened a new one at the same time. My score dropped around 25 points. So if you are ok with that drop go for it. I had a 795 score at the time and it was back up in less than a year.
OP is closing his ONLY card, so he will go from having a 20 year card to having a brand new card. Not the same as someone closing their oldest card among many.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:35 pm
by FIREchief
DTalos wrote:
Sat Oct 12, 2019 6:30 pm
FIREchief wrote:
Sat Oct 12, 2019 6:26 pm
DTalos wrote:
Sat Oct 12, 2019 6:09 pm
I plan to cancel a credit card I have had for 20 years because the annual fee doesn't provide a good cost-benefit for me, and the company refuses to waive it. I cannot downgrade to a no-fee card with the same company. This is my only credit card.
Are you planning to not have any credit card going forward?? :confused
I plan on waiting for a bonus offer (maybe there will be one on Black Friday LOL) on a no annual fee cash back card. I can go without a credit card for a couple months.
That's interesting. Most of us would struggle with not having a credit card. Sure, a debit card can be used for the same stuff, but they generally lack the consumer protections that many of us highly value. At a minimum I would think you would want the FIDO card so as to get a 2% discount on everything. No annual fee.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:37 pm
by iamblessed
RickBoglehead wrote:
Sat Oct 12, 2019 6:35 pm
iamblessed wrote:
Sat Oct 12, 2019 6:33 pm
I closed my oldest card and opened a new one at the same time. My score dropped around 25 points. So if you are ok with that drop go for it. I had a 795 score at the time and it was back up in less than a year.
OP is closing his ONLY card, so he will go from having a 20 year card to having a brand new card. Not the same as someone closing their oldest card among many.
I only had two at time and the other one was not very old. So I think I gave him a ballpark number.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:38 pm
by iamblessed
RickBoglehead wrote:
Sat Oct 12, 2019 6:35 pm
iamblessed wrote:
Sat Oct 12, 2019 6:33 pm
I closed my oldest card and opened a new one at the same time. My score dropped around 25 points. So if you are ok with that drop go for it. I had a 795 score at the time and it was back up in less than a year.
OP is closing his ONLY card, so he will go from having a 20 year card to having a brand new card. Not the same as someone closing their oldest card among many.
I only had two at time and the other one was not very old. So I think I gave him a ballpark number.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 6:46 pm
by DTalos
I don't know if this makes a different or not, but the person I am writing this for (doesn't use internet) has a credit card history going back 60 years with never a late payment and has only had one open credit card at a time, each for about 20 years, so let's say 3 credit cards his entire life.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 7:34 pm
by lakpr
DTalos wrote:
Sat Oct 12, 2019 6:46 pm
I don't know if this makes a different or not, but the person I am writing this for (doesn't use internet) has a credit card history going back 60 years with never a late payment and has only had one open credit card at a time, each for about 20 years, so let's say 3 credit cards his entire life.
That does not make any difference. The previous credit card, from what you say, had been closed 20 years ago. Credit bureaus are not required to report any credit line that is not open 10 years after closure. The limit us 7 years for a credit line with negative information, 10 years for one with positive information. May be give another 6 months for the annual purging exercise to catch up with this particular line, so it is a near certainty that the previous two cards your person had don't appear on credit reports. It would have been purged at least 9 years ago

Get a new credit card with no annual fee. There are plenty of credit cards that give you 2% cash back on your purchased without annual fee. One or two of those might even carry a signup bonus.
- Fidelity card
- Citi Double Cash
- Alliant Credit Union Platinum rewards visa (must redeem the cash back only into an Alliant savings or checking account)
- PenFed Power Rewards visa (must maintasin an Access America checking account with them and always maintain at least $500 at all time, also must redeem into that checking account)

Just off the top of my head. There might even be some local credit unions or banks that might give you similar deals.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 9:19 pm
by RudyS
Get another card.
About effect on car insurance rates: Some states (Massachusetts, California, Hawaii) do not allow insurance rates to be based on credit score.
It might be possible to get away without any credit card in daily life, but you will find it impossible to rent a car without one.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 10:48 pm
by criticalmass
DTalos wrote:
Sat Oct 12, 2019 6:09 pm
I plan to cancel a credit card I have had for 20 years because the annual fee doesn't provide a good cost-benefit for me, and the company refuses to waive it. I cannot downgrade to a no-fee card with the same company. This is my only credit card. I have read conflicting information on how severely this will impact my credit score and hence my auto/home insurance rates when it comes time to review. I have been with the same insurance carrier for decades if that matters. What have been your experiences with cancelling a long-term credit card and how it affected your credit score relative to auto/home insurance rates? I absolutely do not care about obtaining a loan or mortgage in the future, since I never will. How long (in years) will my credit score be negatively affected by closing my one and only 20 year credit card?
See similar thread on the Consumer board, where folks are asking about impact of closing an old card when getting a new credit card.

https://www.bogleheads.org/forum/viewtopic.php?f=11&t=292320

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 11:34 pm
by JBTX
Open another one or two cards and establish a history before you close. Pay the fee. You made a mistake only having one card. But what is done is done.

You can easily more than offset fee with credit card bonuses. See doctor of credit best credit card bonuses.

If you are married become cosigner on a card with large credit line and/or long history.

Insurance companies have different formulas. Progressive is very dependent on its own credit formulas. Others not as much. If your premium does increase, call and ask why. If it is due to change of credit formulation, request to talk to the insurances company's internal credit dept. Explain the situation and ask for an exception to be made. I actually did this, twice, with progressive, but finally switched to a different insurance company because I got tired of having to do that.

On balance it is better to have a diversity of credit vs relying on one or two credit sources. The short term negative impact of opening a new source is usually much less than the negatives of having few credit sources

Re: Credit Card Cancellating and Insurance Rates

Posted: Sat Oct 12, 2019 11:54 pm
by KT785
DTalos wrote:
Sat Oct 12, 2019 6:46 pm
I don't know if this makes a different or not, but the person I am writing this for (doesn't use internet) has a credit card history going back 60 years with never a late payment and has only had one open credit card at a time, each for about 20 years, so let's say 3 credit cards his entire life.
For the sake of clarity, it might be easier if you edit your original post in both this and the other thread to be clear about the person whose situation you’re discussing and how you are a party to it—you’re talking about someone who has only ever had one credit card at a time but now are timing applications for sign-up bonuses?

Based on the information here, the person is presumably 80+ years old which may mean they don’t have any other active credit accounts open. If the credit card is the only active account at all (including mortgage, car loans, etc.) it could be even more impactful.

As others have noted, closed accounts (and paid off accounts like mortgages, etc.) fall off after a period of time. I’d be mindful about going from only one account at all to none.

Do note that some states prohibit use of credit information in insurance underwriting, and some carriers don’t consider it either. But you’d need to evaluate the persons specific situation to confirm.

KT785

Re: Credit Card Cancellating and Insurance Rates

Posted: Sun Oct 13, 2019 12:38 am
by 22twain
How big is the annual fee for the card in question, and how does it compare to the total annual spending on that card?

Re: Credit Card Cancellating and Insurance Rates

Posted: Sun Oct 13, 2019 7:59 am
by retired early&luv it
DTalos wrote:
Sat Oct 12, 2019 6:46 pm
I don't know if this makes a different or not, but the person I am writing this for (doesn't use internet) has a credit card history going back 60 years with never a late payment and has only had one open credit card at a time, each for about 20 years, so let's say 3 credit cards his entire life.
I think you need to find out how high or low that persons credit score is. If it is quite high, it should not matter if you make some changes. But if the lack of credit (only one card) has resulted in a low score, then you should continue asking questions.

I do not have experience with low score issues like insurance rates, etc., so perhaps my suggestion is a bad one, but I think the card holder should get a new no fee cash back card or maybe even two before they cancel the card they currently have. Having no line of credit when that person applies for a new card could be another hurdle if they cancel the old card first. If that current card fee is not too exorbitant, maybe wait another year before canceling it so that the person could generate some new credit history on one or two new cards before canceling the old card they have that has all of their recent credit history?

If insurance rates could be impacted by this change, don't make any credit changes until after the insurance policy is renewed.

Re: Credit Card Cancellating and Insurance Rates

Posted: Sun Oct 13, 2019 8:28 am
by retiredjg
I would get the second card before cancelling the first card. Not having a card at all might mean the person does not get the best rates or best choices on the next card.

Re: Credit Card Cancellating and Insurance Rates

Posted: Mon Oct 14, 2019 11:03 am
by DTalos
I know it's been reinforced that cancelling the 20 year old credit card will lower a credit score, but is there still the same impact if a new card is opened first and then a few weeks later, the 20 year old card is cancelled?

Re: Credit Card Cancellating and Insurance Rates

Posted: Mon Oct 14, 2019 1:26 pm
by retiredjg
I think the old card stays on the history for several years.

There is quite a bit of information about credit scores at Kredit Karma (spelling?). When I read it all, it was free. It might still be. You can find some of your answers there.

Re: Credit Card Cancellating and Insurance Rates

Posted: Mon Oct 14, 2019 1:40 pm
by rich126
Anytime there is a credit on your card (i.e., you overpaid or returned something), you can ask for a check. Often they will automatically send out a check after a few months.

Credit scores fluctuate frequently. Recently I've had a number of things going on. Sold a house, paid off a mortgage, got credit cards, canceled cards, etc. My score varied by about 50 points but it was always over 800 and really doesn't matter at that level.

Some companies base age on the family of cards. For example if you've had an American Express card in 2000 but canceled that one and got another one, the age is based from 2000 and not from the newer card. I don't think the other companies do the same thing.

Personally I couldn't see not having multiple cards but if it works for you I wouldn't worry about it. Have you tried calling your insurance company to see what they suggest?

Re: Credit Card Cancellating and Insurance Rates

Posted: Mon Oct 14, 2019 5:25 pm
by lakpr
rich126 wrote:
Mon Oct 14, 2019 1:40 pm
Some companies base age on the family of cards. For example if you've had an American Express card in 2000 but canceled that one and got another one, the age is based from 2000 and not from the newer card. I don't think the other companies do the same thing.
Even at American Express, this was stopped, to my knowledge, at least since 2014.

Re: Credit Card Cancellating and Insurance Rates

Posted: Mon Oct 14, 2019 5:32 pm
by TheDDC
The best way to get a good rate on insurance products is by shopping around and threatening cancellation (and being ready to do so). If a new insurer can’t beat the best price, move on. Credit score or not. It sounds bogus that someone with no credit or someone who closes a random credit card at the wrong time would not be able to obtain the best price on insurance.

-TheDDC

Re: Credit Card Cancellating and Insurance Rates

Posted: Mon Oct 14, 2019 5:36 pm
by lakpr
DTalos wrote:
Mon Oct 14, 2019 11:03 am
I know it's been reinforced that cancelling the 20 year old credit card will lower a credit score, but is there still the same impact if a new card is opened first and then a few weeks later, the 20 year old card is cancelled?
Yes. Credit score depends upon Average Age of Accounts, and Average Age of Open Accounts, among other factors. Opening a new account lowers the first factor, and closing the old account lowers the second factor. It does not matter which order you choose to do the opening/closing.