I've seen lots of posts in which people talk about closing their Cap 1 or Providian or other sub-prime or retail cards for one reason or another. Does this negatively affect one's credit score? When you close an account, does it remain on your report for a certain amount of time? Is it listed as postive but closed? Or, will potential creditors think you closed it because you couldn't pay your bill? Thanks.
Shirley, Closing an account can negatively affect your score unless you have low balances relative to your total credit limits. Also, we would need more information with respect to how much available credit you currently have (balances/credit limits), how many open accounts and with which companies, and how long those accounts have been open to help you decide.
Thanks for the reply, Mist. I wasn't talking about myself. I only have three tradelines, two of them (Kmart and Target) are brand spanking new. I was reading various posts on this board today and noticed people in different conversations saying, "I'm going to pay off this account and close it..." and I just wondered what a closed account on a CR looks like to another lender and if these closed accounts linger on your report forever.
I got "BIT" because I closed too many accounts... If you don't have enough "AVAILABLE" credit limits, it will hurt. YOU OWE $3,000 on a TOTAL CREDIT LIMIT OF ALL ACCOUNTS OF $40,000 = 7.50% For this example...say you "DUMP" all cards except 2...now you owe $3,000, but you total credit limit is $5,000...now you are @ 60%...BIG DIFFERENCE... IF THEY ARE NO ANNUAL FEE...KEEP A FEW OF THEM... Buy one tank of gas and pay in full, then put it back in the drawer for 6 months...
If you have a credit limit like $200 and an annual fee of like $72.00, an interest rate of 20%+ by all means CLOSE IT!
About closing accounts: Positives- Get rid of annual fees. Improve credit score. More than 5 or so open accounts can lower your credit score. Negatives- Less credit available for use. If you carry any balances, closing accounts increases overall ratio of balances to available credit. As far as reporting goes, as long as the credit report says "closed by consumer," "paid in full," and "never late," then it's a paid account which actually helps you. If it says that the bank closed the account, then they start to worry. Also, too many accounts closed at once could be a sign of financial trouble, and might look bad.
ive been pondering this as well. I have 11 accounts with zero balances, most under a year old. They help my ratio of debt to stay under 40%. I've been paying down my cards with balances at over 30% per month, but its nice to have a comfort zone with all the layoffs and such in case of emergency.
The following is cut and pasted directly from the www.MyFico.com web site: ------------------- Whether you are showing a balance on certain types of accounts. In some cases, having a very small balance without missing a payment shows that you have managed credit responsibly, and may be slightly better than no balance at all. On the other hand, closing unused credit accounts that show zero balances and that are in good standing will not generally raise your score. ---------------------- No...but it will LOWER your score if closing it skewers your balance to credit limit ratios!!! Mist
