I am getting mixxed opinions on something.. does closing out a credit card account really hurt your credit?

Question

My whole life I have been told its not good to have too many open credit cards that you dont use.. but on here it appears that people are saying it is hurtful to your credit score to close out credit cards.
Thinking about is rationally I would think that closing accounts you dont use would help your score since you are lowering your potential future debt which would give you less chance of getting in trouble finacially...

Answer 1

Probably because people on here work for Visa and Amex....

Having too many open accounts IS bad for your credit, and any honest lender would tell you the same thing. What people are saying is that closing out 1 or 2 two accounts that you have had good long standing relationships with can be bad because it lowers your credit history-- and that happens to be true.

But if you have like 6 or 7 open cards that you don't use, you should cancel a couple ( start with the most recent) because it will show lenders that you have less chance of getting into serious debt trouble down the road.

Always remember that not everyone on here is looking out for YOUR best interest...

Answer 2

There's a great deal of variance, because different lenders will look at open or closed credit card accounts differently, and the majority of that thinking will have to do with the balances you hold on those cards.

I work in a credit union and I asked some loan processors here last year about the two credit cards I have; one has a $6000 limit, the other a $500 limit. I asked that, when I pay them off, should I keep them open or closed? What will look more favorable to a lender who is considering lending me money? Both said they would keep them open. The reason why is because if you pay them off and don't use them, it shows responsibility. You have "free" money in your hands, but are not using it. And the longer you go without using them, the better it looks. These were criteria they used when looking at potential debtors' credit reports.

But also, one of the things they consider, is, "Well he has this credit card he's not using, but what happens if he loses his job and needs to use it?" So really, it can look both good and bad--which way it looks is mostly based on how the rest of your credit looks.

If necessary and you have credit cards open with large limits, you can always call the card company and ask them to reduce your limit if you think a substantially large limit might make you look unfavorable. Just make sure you can lower it to the amount you want, and it's paid off that far!

In my opinion and all the advice I've heard about it, I would keep them open. I also once thought that closing a credit card once you paid it off made you look more responsible but think of it this way: you're considered "debt free" on that account since you owe nothing to it, yet it still qualifies as credit you can use. But having an actual closed credit card account (closed by you) doesn't "hurt" your credit at all; your actual credit score won't change for each account you close.

Answer 3

"Your potential future debt" has no bearing on a credit score. Credit scores are about HISTORY, not FUTURE.

There are several reasons that closing a credit card can hurt your score:

1) It was an older card, and closing it effectively shortened the average account length for other cards. (History is a big chunk of your score.)

2) You had a lot of available credit on that card but not on otherse, so closing it effectively highered your overall utilization (balance vs. limit) ratio. (Utilization ratio makes up to 35% of your score.)

3) You dont have that many accounts so closing it made your overall "portfolio" of accounts smaller.

Closing an account CAN help if it is a more recent card and your other cards are older.

Answer 4

If you have too many cards, you could make it so your access to debt is too high. However, if you close out older cards that you no longer use and only keep newer ones, you could create the image that your credit history is less than what it really is...it's kind of a double edged sword.

I would suggest closing out cards you don't use providing they are newer cards and keep the older ones. If the new ones are much better cards...close the older ones, take the hit and in a few months you should be back up to where you are now if not higher...

Answer 5

Part of your credit score is based on the total balances you have on all your cards verses the total amount of credit available.

So yes, closing out a credit card account with a high limit will hurt your score because you have reduced the amount of available credit without reducing the outstanding balances.

Answer 6

Having less cards is a good thing. You should have 1 or 2 cards but no more. Your open cards should never be more at more than 50% of your limit. If you have gotten your credit rating, you will see that points are deducted for having numerous cards. Good luck; credit is a hard thing to rebuild once you screw it up.

Answer 7

This actually has a variety of answers due to fluction in people...do u have numerious credit accounts already open...if so...closing one or two is not going to hurt and will actually help.

However, if you only have a few credit accounts in your history record then perhaps you may wish to leave this one active.

Hope this helped.

Answer 8

closing the cards dings your credit. cut them and dont use them.................... crazy but true.........