Does it hurt, help, or do nothing to your credit score when you pay off a credit card and close the account?

Question

What is the best option here?

Answer 1

A big part of your credit score is the ratio of debt to available limit. Paying your credit cards off lowers the debt but cancelling the card decreases the available limit. So paying credit cards off helps but closing hurts.

Also, closing an account that you've had for some time, closes that credit history which further impacts your score.

Some people will tell you to never close a credit card account. But I think it's foolish to keep accounts open just for the sake of having them. You have to monitor and secure those accounts and there's just too much opportunity for problems.

I recommend that after you pay off all your credit cards, you keep the two oldest major credit cards that do not charge annual fees. Only keep store or gas charge cards if you have some special reason.

Use the cards and pay them in full and on time every month. You'll save on interest and establish a good payment history.

Answer 2

You're on the right track in your thinking because the less debt you have the better your credit score will be, the only thing you have to keep in mind is that you want to have credit open to you whether you use it or not so don't close the cards that don't charge annual interest rates. Closing your credit accounts is akin to having less credit available which will hurt your score. So yes, go ahead and pay off your debts and then watch your score go up (with myfico score tracker that gives you live updates as they happen) -- then go back and clean up any mistakes on your credit report. In a short amount of time you'll discover a nice boost in your score.

Answer 3

a million. commencing new credit lowers your score for the 1st 6 months 2. donning balances can heavily decrease credit under no circumstances use greater suitable than 30% of your shrink Ex: On a $500 shrink card, under no circumstances permit the stability touch greater suitable than $a hundred and fifty at any time 0% or ninety 9% this is not important to the Fico scoring gadget a thank you to get actual credit scores: Get any card. do no longer trouble regarding the interest value. once you get the bill interior the mail, pay it in finished. this way you under no circumstances pay interest of any form and get scores which will amaze any destiny creditor

Answer 4

It would be better to not close the account. If you really don't need the cards, Just pay them down and leave a $10.00 balance on them and just pay the monthly payment. Pay 50 cents more than the payment is asking for. This way you credit report will show positive activity and your payments are hardly going to be a burden on your wallet. Some activity is better than a closed account.
I hope this helps....

Ruben Barba
Realtor / Mortgage Loan Officer
Windsor Capital Mortgage Corporation

Answer 5

I think it helps because it shows that you are a responsible, trustworthy person. Even closing it is smart to prevent it being used by someone else.

Actually, I believe the best option would be to pay it off and keep it open to use as a convenience to you, but essentially, keep it paid off. This way the Credit Card Company will want to offer you even more credit. But, don't let them entice you to use that much credit. Beware of the temptation. Stay safe and use your credit wisely--to your own advantage, not their's.

Answer 6

NO...it doesn't its when People ask a Credit Card Company to Lower their Limit...it throws up a Red Flag

Answer 7

Of course it helps to pay it off but, it does not help to close it. It is actually helpful to pay it off then keep it.