Who issues the Sears credit card?
Is the Sears credit card a good card?
How does the Sears credit card work?
Some time ago, we needed to buy a fridge. We applied for and were approved for a Sears Mastercard and purchased our fridge with that. We paid it off, bought a stove for an aparment we manage (landlord paid us back) and paid it off as well. We have not used it since.
Today I received a notice from Sears stating that they would lower my credit limit from $4,000, to $2,001 if I don't make purchases equaling $500 by January 31st.
My credit rating is good, at 783 for the two I can see on Credit Karma. I don't want it to fall, because we want to buy a house in the next year or so.
My average age of credit is low, so I worry about canceling the card, but having the limit go down will also affect my score, as will making a $500 purchase that I don't need and can't pay off immediately.
I'm not sure which will affect my credit the least. Can you advise?
This is nothing to worry about.
The only thing this can affect is utilization. Utilization is temporary and easily controlled. If/when you want to buy a house, you simply need to use less of your available credit shortly before applying (or, alternatively, pay down your purchases before the balance reports).
My average age of credit is low, so I worry about canceling the card,
Cancelling the card would be counter-productive. Doing that would reduce your available credit by $4000 instead of by $1999 (plus would lower your AAOA down the line - this can take 10 years to have any effect).
You can pretty much ignore this for now.
Regarding closing the account:
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Age of Credit: FICO calculates both open AND closed accounts in that age of credit model and the closed account remains for ten years. Therefore, the impact is negligible. You can close it and there will be no affect on this portion of your FICO score.
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Utilization: Closing could, however, affect the overall utilization factor of your FICO score if it results in an increase of utilization percentage based on the closing. Given your high score it's unlikely it will.
Therefore, closing it won't have a negative impact.
Small exception: Your Credit Karma/Vantage score might dip because they calculate only open accounts in age of credit. However, that is not the same as FICO (see #1) and almost no lenders use this score in lending decisions.