I have a problem with credit cards, and recently paid off a maxed out card with a VERY large credit limit with help from my parents. I would like to close the account so I can't use it again, but I've heard that this will have a negative effect on my credit rating. Is this true, and if so how much of a negative effect? I'm trying to weigh the risk of me caving and racking up more debt vs. the ultimate effect on my credit score for mortgage, care loan, student loan, etc. in the future.
2006-09-23 03:50:18 · 9 answers · asked by τεκνον θεου 5 in Business & Finance ➔ Credit
Yes, if you close your credit card account it will hurt your score. It removed a portion of your credit history, plus it lowers your debt/credit ratio.
Here is what I suggest you do. Call the CC company and tell them to lower your credit limit (maybe $200). That way you are not tempted to run up a huge bill, but you still have a small stash of credit available for emergencies. If you want, you can have them freeze your account (not close it).
2006-09-23 09:39:49 · answer #1 · answered by Anonymous · 2⤊ 4⤋
I believe it will have some sort of negative effect. I had a JCPenney card which I closed the account on after paying it off. It didn't effect my credit really because I had it for a while and slowly paid it off. When creditors would ask about it, I just told the truth, I hardly used it. They can pretty much tell from the history on it. If you paid off a "maxed out" card and then close the account, creditors may look at it as you closed it because you didn't trust yourself. Try and keep it open, be diligent, and keep the charges small, pay a little extra towards the monthly fee every month to keep the finance charges low and try and rebound to get your credit score back up. Good luck! :)
2006-09-23 15:02:05 · answer #2 · answered by crazzkc24 4 · 0⤊ 0⤋
Recipe for a credit score
To calculate a score, Fair Isaac uses 22 pieces of data collected from the three major credit bureaus, Equifax, Experian and TransUnion). The lowest possible score is 300, while the highest is 850.
The final number is a composite of individual ratings in five categories:
•Payment history (35% of the rating)
•Length of credit history (15%)
•New credit (10%)
•Types of credit used (10%)
•Debt (30%)
Income is not a factor. "A person can have a very high income and never pay their bills," explained Craig Watts, public affairs manager for Fair Isaac.
Fair Isaac calculates a FICO score based on the data provided by each credit bureau. It's not uncommon to see up to a 50-point differential between ratings. The reason: Bureaus collect data at different times of the month, and one bureau may have inaccurate information.
2006-09-24 04:07:38 · answer #3 · answered by Jacque w 3 · 0⤊ 0⤋
It will bring your score down... I'm not sure how much. It's because the longer you have a credit limit open the better it reflects on you. You could cut up your card and resolve not to call and have them send you a new one, but if that won't work for you and you know you'll cave then your best bet is to cancel the card all together. Lowering your score a little is better than lowering it a lot by over spending.
2006-09-23 11:59:10 · answer #4 · answered by starsmoak 5 · 1⤊ 0⤋
Yes, it very well could. OPen credit that you do not use is more valuable than no credit at all. It demonstrates that you do not max out all the time, which appears to be the problem.
If you're afraid you'll cave, cut up the card. You can keep the account open without having the card. Or give the card to your parents and make sure that you only get to use it in extreme emergencies.
2006-09-23 11:27:55 · answer #5 · answered by misslabeled 7 · 0⤊ 0⤋
No, it will NOT have a negative effect on your credit rating. If it had been closed by the lender it would have. On the other hand, Keeping the credit line open and not using it will have a positive effect on your credit score because one of the things they look at is percentage of available credit used. The best thing of all would be to charge a small sum like $30 per month and pay it off in full every month. If you feel you cannot be disciplined enough to do those things, go ahead and close your credit line. No harm done!
2006-09-23 10:56:59 · answer #6 · answered by Anonymous · 0⤊ 2⤋
To understand how your credit score is broken down see http://creditwisdom.blogspot.com/2006/09/fico-breakdown-how-your-credit-score.html
Part of your score is assessed by the length of time accounts have been open and the accounts in good standing.
2006-09-23 16:35:00 · answer #7 · answered by Anonymous · 0⤊ 1⤋
I would be willing to bet that your score actually goes DOWN after paying off a large amount. SOmething to do with Fair Isaacs crazy scoring model.
I would definately not close that account especially if it has some age to it.
Regards,
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2006-09-23 12:15:18 · answer #8 · answered by phylisrn 2 · 0⤊ 1⤋
yes...
2006-09-23 11:16:48 · answer #9 · answered by Anonymous · 0⤊ 0⤋