Why is it that when you close a credit card account it reflects negatively against your credit rating? Wouldn’t leaving it open with a zero balance be more of a credit risk, seeing that the card/account can still be used at any time possibly quickly altering your income to debt ratio?
2007-03-07 18:49:25 · 5 answers · asked by Anonymous in Business & Finance ➔ Credit
Say for instance the only credit you have is one credit card.
If you close the card you will no longer be using that account. Companies will not be able to see how you currently use credit and will have no way of knowing if you would be a potential risk or not. Eventually the closed account will fall off removing all traces of how you had used credit.
If you have that one open card and use it wisely. You keep the utilization low, paying in full or paying more then the monthly amount due. By doing that, companies can see how you use credit and be able to tell that you are a good credit risk.
(Available credit does not equal debt)
2007-03-07 19:16:18 · answer #1 · answered by echo 7 · 0⤊ 0⤋
Length of time a certain amount of accounts have been open is a key factor in getting a loan. Income to debt ratio is separate from your credit score, but the debt part of it is taken from your credit report since that is the only real proof. You are right it doesn't make perfect sense, but it is all the lender has to go off of.
2007-03-07 19:08:05 · answer #2 · answered by Nate87 2 · 0⤊ 0⤋
Having too many credit cards reflects negatively. Debt added with all your cards credit limits ads up to less you can borrow.
2007-03-07 18:58:44 · answer #3 · answered by Dennis G 5 · 0⤊ 1⤋
Why dont you ask your bank card first?
2007-03-07 19:07:49 · answer #4 · answered by Wally H 2 · 0⤊ 0⤋
I agree. I always wondered that myself.
2007-03-07 18:57:03 · answer #5 · answered by chellek 5 · 1⤊ 0⤋