Do I close credit cards after paid off to increase FICO score?

Question

I have recently rolled over some higher interest credit card debt over to 0% interest cards to pay off faster. Is is better for my FICO score to leave them open or close them? I have heard to do it is better to close them from a financial advisor on TV but recently asked a accountant who said to leave them open. So now I am unsure about which way to go with them.

Answer 1

Ok heres the deal. Leave them open. That was fine that you transferred your debt to the new ones but here is basically what happens. Your score is based on the age of the accounts and your balance oon the oldest account. That increases your score. Now taking and opening a new credit account will lower your score some. Also since you have transferred your balances to the new card it will lower your score again. Of course this depends on your credit limits. If you have a new line of credit and are 1/2 way or higher to your max credit line then guess what your score comes down. General rule of thumb is to keep old accounts open and maintain a low balance on them. Age of accounts has a very good impact on your score especially if your balance is low compared to your credit limit.
Basically you have done some damage to your credit now. depending upon your score at the time it could be minimal to high. Credit scoring will in fact take you down more if you are higher in your score then if you are lower in your score.
Best bet for you would be to not believe what you see on tv. Take your old accounts and leave them open. On the old cards take a small bill you have and do an autopayment on that. Alternate between paying the minimum one month and then pay it off the next. This way you keep it active and you also show a low balance. As for the new one you have opened sacrifice and get it paid down as quick as you can. Get it down to at least the 1/2 mark or lower. This card is gonna hurt you for a little bit. But make the payments on time everytime and the score will start to rise in a few months. It won't be to where you had it before.

Answer 2

In a word, NO! Do not close them, it will hurt your credit score rather than help it. If you don't intend to use them, then cut them up and throw them away but do not close the accounts.

Another thing you should consider is using open accounts to balance out your "debt ratio." For example, let's say you have two credit cards, both with a $5,000 credit limit. The first card is "maxed out" with a $5,000 balance, and the second card has a $1000 balance. You could borrow $2000 on the second card and use that to pay down the balance on the first. That would give you a $3000 balance (60% ratio) on both cards. Still not good, but much better than having one card "maxed out."

If possible, get your debt ratio at 35% or below on all your debts. This should help your credit score.

If you're serious about increasing your FICO score, you should get a good book on credit repair and start fixing your credit now. Although credit repair doesn't work 100%, in most cases you can make some very substantial improvement in your score,

A good source is www.ErasingBadCredit.com

Answer 3

You want to leave your credit accounts open with low to no balance. Do not close the account leave them open. A large part of your score depends on the length of time that you have had open credit lines in good standing. So and open account with no balance is a very good thing. After you pay your accounts to a 0 balance it will take sometime 30-60 days for that info update to your credit report. Once the account balance info is updated your credit score will start to improve. The longer the account is open in good standing with a low or no balance the higher your score will climb. Fixed rate loans such as car loans and mortgage loans in good standing for 24+ months will bring your score into the mid 700's. Credit score swings from mid 700's to mid 600's are largely due to high credit card balances. Be cautious doing 0% rollovers this can be a huge trap. Doing this can lower your credit score for several reasons. 1)Your balance to credit limit ratio will be high, this lowers your score. 2)When you open the new 0% account the credit reporting agencies weight your score on the number of new accounts you have and the length of time since you have opened you new accounts. 3)When you apply for the new account it is an inquiry, multiple inquiries lower your score. This can hurt your score but if there open already its fine don't close them.
This is a benefit for your credit card companies because if your score is lowered then your locked in with them. If anything happens, you late on a payment even if its “lost in the mail” your rates jump up to 20% and you lock in with a high rate on a large balance.

This =$$$$ for your creditors.

Answer 4

Really, it depends on how many cards you have open or how much credit you have access to (i.e. add up the credit limit of all your cards). The more credit you have access to, the higher your FICO score (so leaving them open will raise your score). Unless you have a ridiculous number of cards, which may cause a lender to deny you for having "too much credit".

The reason debt counselors tell you to close the cards is because generally people who have debt trouble will just max out the cards again after paying them off. So, psychologically, it is better for them to close the cards.

So, having access to more credit (more cards) will raise your FICO score, but if you may fall back into using them again, you should close them.

Answer 5

I have taught seminars on FICO managment and a factor that affects scores in number of open accounts and amount of available credit.

You should close any accounts that you are not using for more than one reason. 1. You open yourself to an additional outlet for fraud and identity theft. 2. You have access to additional credit that is unneeded and therefore will reduce your credit score.

Credit Scores are a reflection of 2 things. The creditor's past and current credit accounts, and the likelyhood that credit will continue in the future. Having multiple open accounts with no balances is a risk factor for a bank becasue your current credit picture can be dramatically changed with the swipe of a card.

You should keep at least one revolving card open and active. Mulitple cards will hurt your score.

Answer 6

OPEN. You do NOT want the only open credti cards to be recently opened. You want the longevity in your accounts-- this makes up atleast 10% of your score. If you take all your old accounts, roll the balance to new ones and then clsoe the old ones, you're pretty much starting over with the history.

You also want a low utilization ration (balance vs. limit) and the cards openw ith 0 balance help bring that down.

Answer 7

The answers saying to leave them open are correct. There's a whole page on wikipedia about the FICO scores and what to do to improve them.

Answer 8

open but you have to leave that balance at 0. showes more avail credit!