Reply to Closing Credit Card Out without Negative Impact on Credit

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[quote=Anonymous]Good Afternoon--

Curious to hear advice on my credit situation, as the research I've done on the credit reporting process seems to be as clear as mud.

I'm in my late-twenties and graduated college during the heart of the financial crisis (07-08).  In an effort to establish credit, I went to my bank, Wells Fargo (then Wachovia) and inquired about opening up a low limit credit card.  Despite being debt free and employed, the banker literally chuckled in my face and said there wasn't anything she could do (granted, she wasn't being malicious, that was just the market at the time).  Next, I tried to get a Target credit card and was denied as well.  Finally, I shopped around and was able to open up a $750/month Capital One credit card.

Over the next couple years, I made small monthly purchases (usually gas) and paid my bill off in full, and on time, every time.  Soon, I was able to open up a Wells Fargo credit card with a $6500 limit, and a Target card (for occasional shopping).  I never utilize much of my combined or individual credit (rarely go over 10% month) and like to have the credit option for emergency situations and to build credit for future house/car purchases, etc.

Currently I have the following three cards:

Wells Fargo ($6,500 limit; open 2.5 years)
Capital One ($750 limit; open 4 years)
Target ($2,000 limit; open 1.5 years)

Between the three cards, I don't have any missed or late payments.  CreditKarma.com has my credit score listed at 755.  However, I have a few questions about opening/closing cards and how that impacts the credit reporting process.

1) I haven't used the Capital One low limit card in about 8 months, so my initial instinct was to close it and look for a replacement card with more attractive rewards options.  However, some of the research I looked at said that the length of credit history plays a major role in calculating a credit score.  Since the Capital One account is my oldest, is it inadvisable to close this account?

1A) Conversely, since I'm not using this Capital One account any more, is it hurting my credit score by staying open and unused? Aside from account maturity, it doesn't serve me much utility based on its low limit.

1B)  My CreditKarma score has gone down from 765 in May and June 2013 to 755 in July and August 2013, and I'm unable to figure out why.  I was thinking the inactivity on the Capital One card may be it?  All of my payments have continued to be on time, and I haven't over utilized the card.

2) Are rewards cards worth it?  I'd be most interested in cards with legitimate travel and/or hotel rewards. Any suggestions?

Any thoughts are appreciated![/quote]

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