How is this affecting my credit score?

Question

I have a couple store credit cards (Victoria's Secret, New York & Co., etc). They have a $0 balance on them so my question is...is it better to keep the account open with a $0 balance or just cancel them? Which is better for my credit score??

Answer 1

I am going to do the best I can to explain this. I work for a major bank and have for over 20 years and I do corporate lending to fortune 1000 companies, now you know my back ground. Credit scores basic 101, everybody starts with a perfect score every night and then the score is calculated by subtracting from it negatives, as you will see on any credit report were it says scores factors they are all negative. If you have a credit card that has a zero balance it does effect your score. 1st having that credit available as a percentage of overall availability is a positive e.g. total credit card limits 5000 with 1500 outstanding balances is a positive since you have more than 50% of your available credit not used. 2nd if you have a bunch of cards with zero balances and this card is also not being used look at your available credit lines and total them and deduct outstanding and looking to the 1st example if you close this account will you still be below the 50% threshold? If yes close it if no leave it open because if you close it your % will increase of used available credit a negative and thus a reduction in score. Also any time you apply for instant credit at any store that is a 10-20 point hit to your score depending on the merchant as it is viewed as your trying to overextend yourself.

Answer 2

It really shouldn't matter, but I'd probably leave them open. It is not public knowledge how your credit score is determined, but I have heard a couple of things. One factor is the ratio of total credit used to total credit available. This would argue for leaving them open with a $0 balance. Another article I read suggested that closing an account may raise a red flag on your credit report since the reporting agencies don't always note that the account was closed by the user. That is, someone might think that the account had been closed by store. So, again I'd leave it open. You can however cut up or shred the cards so you won't be tempted to use them and so someone else couldn't use them without your knowledge.

Much more important to your credit score is a history of paying your accounts on time and in full (or at least the minimum payment.) If you don't have this kind of history, then make a small purchase on a credit card and then pay the card in full when the payment is due. Do this for a few months and your credit score should improve.

Answer 3

It's normally better to keep them open with a $0 balance, becaues that improves your ratio of debt to limits. The buffer there can counteract more credit used on your other cards.

If you had like 20 cards, I'd say close a couple. If you only have a few, keep them open.

Answer 4

Low score is the two you do not have sufficient credit, or or any taking part in cards you have they don't look to be sufficient 'loose' credit, meaning your on the brink of max on the taking part in cards. while you're procuring for a motor vehicle, the credit corporation is conscious that the place ever you flow they'll pull your credit it. some dealerships will placed your credit obtainable for some businesses to tug and notice in the event that they might get you the indoors maximum loan bcuz they might desire to make the sale. while you're searching for for a motor vehicle it would of been extra effective to call around to a financial corporation and get your own funds with the aid of them so as that the dealerships do not pull it plenty. sure it does result your score, supply it sometime till now you verify it back. and that is substantial what type of credit you're searching for for, make helpful that that is substantial. do not prepare for purely any card. the way they like it to set your self as much as purchase a house is having 3 lines of credit-3 taking part in cards open with 30% getting used and the open line being a minimum of a 300 and sixty 5 days. cope with it like gold, very careful, that is substantial.

Answer 5

Good question -- we all rely on credit to get the things we need, but having too much available credit may lower your score. This happens because you may have enough potential credit to get yourself into trouble.

Banks will look at the number of cards you have (called revolving accounts) and think "This person has enough credit available to go on a shopping spree at the mall, and may not make on time payments to cover the balance."

This doesn't mean you shouldn't have credit cards, but try to prioritize and carry only what you need. Having one card and paying it on time is much better than having several cards with a $0.00 balance.

If you have not established credit yet, then you should begin responsibly using one of the cards and cancel the rest. This means calling the number on the back of the card, not just cutting the plastic.

Good Luck!

Answer 6

I'd say keep them open because it shows you are able to keep payments up with credit facilities.