I just paid off 2 credit cards. Do I leave them open or close them immediately to help my credit score?

Question

I wouldn't be putting anything on them. I was just told it can help your credit score to keep them open for a while and not put anything on them. I just wanted to make sure this was good advice, because I hear so much about people closing their accounts.

Answer 1

Everybody's telling you to leave them open, I'm going to tell you why you should leave them open.

This is what makes up your credit score:

1. Payment history- 35%
2. Total debt vs. Avaiable credit- 30%
3. Length of time establishing credit- 15%
4. Types of credit established- 10%
5. Inquiries and new accounts- 10%

Ok, now when you close an account, it immediately affects #1, 2, & 3. Whatever active payment history you have will be shortened.

It also shortens the average age of accounts. If these accounts have been opened for a while, and then to close them would give the appearance later on that credit has been established more recently than it has.

Closing accounts also disrupts the mixture of revolving vs. installment accounts. You can't load up on one type of account. An example of a balanced mixture of credit is 3 revolving (credit cards, line of credit) and 1-2 installment (student, furniture,appliance, car, boat, motorcycle, mortage) accounts.

And more importantly, closing accounts decreases the amount of avialble credit vs. the amount of debt that you have making it look like you owe more than you're capable of borrowing. If you have $10000 in debt from other accounts beside credit cards, and you close the credit card accounts, you don't have that available credit to offset the total debt you owe.

The best suggestion would be to keep the accounts open and make small purchases ($20/month or so) that can be paid off every month to show activity. This way, the balance stays low, if not at 0, and the card continues to report positive activity every month.

Answer 2

Do not close that account! Papache is dead wrong. Two of the factors that help your credit score are having a low credit balance to available credit ratio, and length of credit history. By closing the account, you will hurt your credit ratio and your length of credit history, and will actually be harming your FICO score. The only exception would be if this card charges you an annual fee, then I would close it. Just do what I do, if you no longer want to use the card, leave the account open but destroy the card or throw it in a drawer somewhere. I have several unused cards, and my credit score is usually in the neighborhood of 800. Are all or most of your cards now paid off? If so, you can start playing games with them. I've got two cards that gave me 0% cash, one for a year, and one for 6 months. I took that cash and put it in an online savings account earning 5.35%. I use their money to make the minimum monthly payments (I have them make the payment automatically from my checking account), and use the rest to earn interest. Right now I'm making almost $200 a month in interest, on their money!!!! Update: Correction. My FICO score was 801 prior to taking out the 0% loans. Due to my credit ratio being impacted, it's now 751. The credit balance will effect your credit score.

Answer 3

Leave them open but put them in a place where you won't be inclined to use them. The idea of a credit score is kind of like how well you can handle a credit card. If you have one, and pay the right amount, then you get good credit. If you have one and don't pay, you get bad credit but if you had bad credit and close them, you can''t up your rating.

Answer 4

Closing them would drop your score slightly but it would rebound quickly. If these are older cards with a good history, closing would hurt more as that good history would also be gone.

Personally, I don't think it's a good idea to keep open a lot of credit cards that you don't use. Just too much potential for problems. If these are store credit cards, I'd be more likely to close them.

Only keep open 1 or 2 major cards (Visa, MC, Discover). Pay them off in full every month. Fastest way to get automatic credit limit increases.

Answer 5

I agree it is generally a good idea to leave them open -- it can be a good indicator of your ability to wisely manage your credit. However, if you have several credit card accounts open, it can actually hurt your credit score. The reason: creditors see that you have the potential to run up a huge debt if you start charging on all these cards!

Be careful of opening up too many (this is easy to do with all the store credit cards being offered every time you turn around!).

Answer 6

I'm told that you have to have them open to have revolving credit which helps your credit score. Make small purchases sometimes, at least once a month probably. I would use it for things that you have to buy anyways like gas or groceries, just make sure you put the money back to pay the bill when it comes in.

Answer 7

Leave them open but put them in a safety deposit box or burn them. That way you won't be tempted to use them anymore. Credit cards are the number one reason people get into financial trouble these days. Good job on paying them off!! Now let them go and don't use them.

Answer 8

leave open....buy small things like tank of gas or blockbuster total access.....then pay it when the statement comes in, an active credit card showing timely payments helps your credit score, use the card but make it a zero balance each billing statement to avoid finance charges...if your card charges you finance charges then get a credit card that doesn't if you pay the bill the first time you get the bill

Answer 9

Keep them open, but don't use them. Put the cards away in a safe place and use only cash from now on. Consider taking the money you were spending on those cards each month and putting that money in savings!

Answer 10

leave open. the more available credit the better the score. but if you're not disciplined enough not to use them then it's better to close them.