Does closing your credit card account lowers your credit history?

Question

How about opening too many credit cards? Does store credit cards (Macys etc.) help your credit history?

Answer 1

The answer is yes and no. If you have only a couple of a credit card going back for 15 years and you have low utilization rate on these cards, closing one may reduce your score overall. Accounts that go back longer in time is more positive in calculating credit scores.

Also, if you don't have a high usage of your account, then you have a large availability on the account. That is, if you have a $3000 line but only used $50, that's a positive from an availability factor point of view. Availability is judged both on an individual account basis as well as an aggregate basis.

However, if you have a large number of credit cards, closing one or two may actually improve your score. Having too many accounts may negatively impact your credit risk, making you riskier and therefore a lower credit score.

The reason for this is that longer length of credit history and more availability of credit are positive factors which improves your score while too many credit cards is a negative factor which reduces your credit score.

Here are the general factors of what FICO (the most prevalent credit scoe) is based on:

This is copied from www.myfico.com:

FICO scores are calculated based on your rating in five general categories:
Payment history - 35%
Amounts owed - 30%
Length of credit history - 15%
New credit - 10%
Types of credit used - 10%
The median FICO score in the U.S. is 723


I recommend:
1) Whether closing an account will improve your score depends on if the account contributes more in length of credit history, availability or an apt number of cards.

If you have a reasonable number of accounts, say 10~15 (including mortgages, student loans, car loans, equity lines...etc.), then keeping it may be the better choice.

If you've got 30 accounts out there with certain accounts having late payments or high usage... then it may be wiser to cancel a couple of them.


Just Be!

Answer 2

I am not sure of the specifics of credit scores are compiled. Your credit history essentially provides a history of how you use credit. The question what do store cards say about you as a credit holder?

As a general rule, store cards are not good for your credit history. To build your credit I would suggest:
1. Have one or two credit cards from the same institution...no other credit cards form any other company. One with a low credit limit for Internet shopping, and a high(er) one for retail purchases.
2. Ensure your balance is below the 66% credit limit
3. Avoid keeping balances on a credit card, rather transfer to a line of credit (it is both better for your credit rating and your wallet)
4. Pay your credit card in full on time every month

Answer 3

Being in debt is what makes Credit History. But, too many cards all charged to the max can hurt.
How banks see this;
A person who pays cash all the time and has no debt. Really has not proved they can handle debt. So, Banks not like this, no credit history.
A person that have 10 credit cards, house and car payment. The credit cards are down and not maxed out, payments on time. This a very good credit risk to a bank, and they love these people. These persons show, they can manage debit.
A person with 10 credit cards maxed out, house and car payment. Some payments are late. The bank see these persons as headed for trouble as they can not manage their debit.
So, the bottom line is not how many Credit Cards you have, but, how well they managed. People that are maxed out show they living off the Credit Card, not managing the card.
Hope you see what I saying.

Answer 4

opening too many isn't really bad if you can control them properly. Closing your credit accounts does lower your credit score. Try not to max out your cards, try and keep them under 40% of your credit line.

Answer 5

i think it might desire to have some style of damaging consequence. I had a JCPenney card which I closed the account on after paying it off. It did no longer consequence my credit somewhat because of the fact I had it for a whilst and slowly paid it off. whilst lenders might ask approximately it, I merely instructed the certainty, I no longer often used it. they are able to fairly lots tell from the heritage on it. in case you paid off a "maxed out" card and then close the account, lenders might look at it as you closed it on the grounds which you probably did no longer believe your self. attempt and shop it open, be diligent, and shop the fees small, pay somewhat extra in direction of the month-to-month value each month to maintain the finance expenditures low and attempt and rebound to get your credit decrease back up. sturdy luck! :)

Answer 6

It depends upon how many cards you have open. If you have alot, close the ones you don't use. Keep the oldest credit card open (that proves credit worthyness)