Why Closing completely paidoff CREDIT CARD Account w/ $0 to pay should affect CREDIT negatively instead of +ve

Answer 1

In most cases, closing older accounts does affect your fico score because the account is now showing as closed which means there are no available credit limits. Many lenders view your debt to income ratio and love to see that you have installment loans or revolving lines of credit. It also is sometimes viewed as maybe being a potential problem and that you closed the accounts because of hardships. I would always suggest like keeping the accounts open and charging McDonald's or something small every month. This avoids the company from closing your account for inactivity and raises your score b/c you fall below 30% use of the acct. This is easier to do especially if the accounts do not have any fees (monthly or annual).

Answer 2

Depends, yes, but in some circumstances not all the time.

One of the factors in your FICO is AGE, how long your accounts have been established. If you are closing an old account and you don't have other accounts that are that old, you will lose age. This loss in age will negatively affect your score.

If you have well established credit and close an account then the impact will be little to none.

Two years ago I opened a small account and decided that after three months I was not going to use it. I closed the account with ZERO impact to my score. I have well established credit more than 15 years open history and I experienced no drop in score. I subscribe to monitoring and I pull my real FICOs from my FICO, so I know this to be fact.

If you have a thin file (few trade lines) and short history, it is better to put the card inyour sock drawer, pull it out periodcally to buy a tank of gas and PIF and keep it open till your other accounts have some age.

Answer 3

A large part of your credit score is based on the ratio of debt to available credit limit. When you close a credit card, you decrease the total available limit which would increase the debt percentage if you have balances on other credit cards.

Second, you've had this card for a long time, you close the history when you close the card.

That being said, I personally recommend closing credit cards that you don't use. There's just too much opportunity for problems securing and monitoring the cards. Keep the 2 oldest major credit cards that do not charge annual fees. Only keep store or gas charge cards if you have some special reason.

Do wait till you've paid off balances on other credit cards and the impact on your credit score will be minimal.

Answer 4

It may affect but a little and not for a long time, because other records will override the negative effect. Negative, because formula for calculation credit score is very complicated and includes the influence of closed cards too.

Answer 5

Because if you have had this account for a long time and you close it, They do not factor that in anymore when considerating "account history"The longer your history the better. WORST ADVICE: to cancel your card ( unless you've had it for under 6 months ) pay it down to 0 and leave it active!

Answer 6

What makes you think it does? I've always heard you should close accounts you don't need.