I opened a credit card account a month ago and I misunderstood the policies. I want to pay the bill and close the account. I need to know how that affects my credit score and how bad it is to my credit, to try getting another credit card soon.
2006-09-22 12:56:42 · 10 answers · asked by Anonymous in Business & Finance ➔ Credit
We used to tell people to close accounts they weren't using. Now here's the word from direct from Craig Watts, an executive at Fair Isaac & Co., one of the leading credit scorers: "Closing accounts can never help your score, and often it can hurt."
This knowledge is frustrating to those who want to simplify their lives and reduce the opportunities for identity theft by closing unused accounts. But credit facts are credit facts.
Shutting down credit accounts lowers the total credit available to you and makes any balances you have loom larger in credit score calculations. If you close your oldest accounts, it can actually shorten the length of your reported credit history and make you seem less credit-worthy.
Check out www.creditcardappfinder.com for more articles on credit cards, credit scoring, and personal finance.
2006-09-25 05:05:36 · answer #1 · answered by james j 1 · 0⤊ 0⤋
If you pay your bill you can close your account.
However...
1) If this is your first credit card, do not cancel the account. This is a gem of a tip. I'll say it again. NEVER CLOSE YOUR FIRST ACCOUNT. Especially if its in good standing. Its your first and most established credit account going forward. It will help
Simply keep a zero balance (or buy something between $20-$100 every couple of months and pay it off that very month - this will help your score).
2) If you want to get another card, wait a few months. What counts against you is how many times your credit report has been looked at. Too many inquiries and you start looking risky.
3) If you plan never to use it and there is no annual fee. Just let it sit and use for emergencies. You can ask that the credit limit be reduced so that you don't get "tempted". If there is an annual fee, consider asking them to convert you to another credit card that they offer, that doesn't have an annual fee.
Hope this helps!
2006-09-26 04:41:19 · answer #2 · answered by Sheriam 1 · 0⤊ 0⤋
A lot of people do that but it does NO good.. I have a score f 820 on my credit.. but it could have been higher IF.... I had paid the outstanding on one of my credit cards..I only use one credit card at a time.. I spend/credit spending to a card and in one month, I get the bill and I pay immediately.. BUT during that month when I have NOT YET been given the bill, it is counted as a debt by the credit card agency.. IF I had paid in advance so that I owed NOTHING to the card company, I would have gotten a perfect score.. SO..be sure that you pay in advance for that month prior to anyone asking for the credit report number.. for example, you buy in January, some things.. totaling $1,000. At the end of the month, the credit card company will send you a bill to pay the $1,000 within 15 or so days... But during that time, if a credit report is asked for, it Will be counted that you have an outstanding debt of $1,000.. So.. it is best to make sure that you owe nothing when the credit report is asked for.
2006-09-22 13:01:52 · answer #3 · answered by Anonymous · 0⤊ 0⤋
That's a loaded question. Did you max out the card in one month?
If you did, you will be viewed as a bad credit risk. If you can, pay it off very quickly while not adding anything while you are paying it off and then use it very wisely.
Having a credit card does not mean that you must use it indiscriminatingly. Use it monthly to the extent that you can pay the bill in full each month. It is good discipline to start.
You have to have credit and use it competently to develop a credit rating. It is the madness that folks get into that ruins their credit.
2006-09-22 13:18:22 · answer #4 · answered by Notorious 4 · 0⤊ 0⤋
One of the "many" formulae that Fair Isaac (the FICO score people) use is % of credit available to % of credit used.
If your balance is zero and the account is open, then this part of the algorithm will give you a higher score.
If you close the account, this part of the algorithm will give you a lower score.
If you have many cards open with little or no balances, that gives you a higher credit score, because of this ratio -
Opening and closing credit card accounts lowers your score. Better to open the second account, and then, if you need to, close the first account.
2006-09-22 13:16:18 · answer #5 · answered by Anonymous · 0⤊ 0⤋
I was told by a credit counselor to pay off the card first, then cancel it. If you cancel before it is paid off, it can look bad on your credit. The more inquiries you have on your credit by creditors, the lower your score can be brought down. For example, if you apply for credit 5 times in a short period of time it will be bad.
2006-09-22 13:06:09 · answer #6 · answered by Anonymous · 0⤊ 0⤋
Ideally, your total debt (of all the credit cards together) must not be bigger than 30% of all the credit extended to you (all the credit lines given to you.) So if you close one account, this will decrease the total credit given to you, and increase the percentage of your debt relatively to the total credit. Because the closing of an account will decrease your total credit and therefore increase the percentage of your total debt, it will negatively affect your credit score IF the new debt percentage will be over than 30% of your new (decreased) total credit. If so happens, you can always easily improve your score by opening new credit card. This way, your total credit will get increased and this will decrease the percentage of your debt. As long as your total debt is below 30% of the total credit given to you, you will be alright.
2006-09-22 14:32:45 · answer #7 · answered by OC 7 · 0⤊ 0⤋
Closing a credit card is no problem. It does not go against your score. If you defaulted on an accout and the credit company canceled you - now THAT would hurt you.
2006-09-22 12:59:33 · answer #8 · answered by Arnold M 4 · 0⤊ 0⤋
If you have paid on time and don't have negative reporting on the card, it will not hurt your credit to close the card. It can help your score if the card has a high limit (relative to your earnings and assets).
2006-09-22 12:59:21 · answer #9 · answered by QuickQuestion 3 · 0⤊ 0⤋
i dont know EXACTLY...but the same thing happened to me...and i was told its better to just NOT cancel it and just dont purchase anything with it. maybe it just looks bad, as in like you cant afford it kinda thing? i dunno
2006-09-22 13:01:59 · answer #10 · answered by scion_xb_girly 3 · 0⤊ 0⤋