Yes! If you close an account that still has a balance, several things happen in the way the credit scoring model will interpret your file. If this is a long term account, closing it may also effect how the scoring model intrerprets your credit history and the length (in years) of your credit history. While the total number of accounts remains the same, the number of open accounts is reduced which is also taken into account when calculating ones score. Also, by closing an account with a balance, although the amount of debt on your revolving/installment accounts remains relatively unchanged, you have now effectively decreased the the amount of credit available. This in turn increases the percentage (total credit/available credit) of credit that you are using (negative factor). Best bet, show self restraint, cut up the credit card for the account in question and when it is paid, $0 balance, then close it! Alternatively, transfer all but the $50-75 dollars of the balance to an existing account that might offer a lower interest rate then pay off the other account so that you avoid having the tradeline tagged with a balance transfer entry (negative in some cases).
OPEN BALANCE $0~~LIMIT $7,000 OPEN BALANCE $0~~LIMIT $1,500 OPEN BALANCE $1,000~~LIMIT $1,500 CLOSED BALANCE $5,000~~LIMIT $10,000 BALANCE $6,000~~LIMIT $20,000--30% (WITH ALL ACCOUNTS OPEN) BALANCE $6,000~~LIMIT $10,000--60% (WITH-OUT THE $10,000 LIMIT ON THE CLOSED ACCOUNT) BIG DIFFERENCE...when ever possible...pay the account in FULL before closing it...you do NOT get the closed account's credit limit...but you get what you owe on it in a F.I.C.O. BALANCE TO CREDIT LIMIT RATIO...
Never close an account with balance of anything other than 0 on your reports. Some companies, most notably Cap.1 will not let you close until the balance is 0, some others still jack the interest up until it is paid.
Re: Re: closing accounts with balances bad? FLEET HAS A CLOSED ACCOUNT PENALITY RATE!!! >24% (I THINK)
Re: Re: Re: closing accounts with balances bad? Totally unreasonable. Then again, we are talking about Fleet here.
others still jack the interest up until it is paid. Brad J ============= What's to stop any of them from closing accounts just so they can jack rates? The END ************************* LB 59
Re: Re: closing accounts with balances bad? others still jack the interest up until it is paid. Brad J ============= on what grounds? The END ************************* LB 59
Re: Re: closing accounts with balances bad? Closing a card with a non-zero balance is never a good thing IMHO, but there are times when it isn't a bad thing either. If your card is sending you a rate adjustment notice, letting you know that it intends to raise the rates on your account unless you close it, AND the account is almost maxed anyway, it could well make sense to close it to lock in the lower (older) rates. And if the card is relatively new compared to your general credit history, it won't matter at all. Depends on your situation, in other words. But in sum, it may not be bad, but it's never good.
Re: Re: closing accounts with balances bad? Because they can. If you owe 1k and call to cancel, and the rate is variable, what law stops them from raising the APR a few points? Nothing really. After all, your dumping the card anyway, so why be nice and allow you to pay off at a low APR. Some issuers do and some don't.
