Once I pay off a Credit Card, is it better to keep the card open or to close it, as far as building my credit?

Answer 1

Keep it open, this is why:

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

By you having a credit card whether you close the account, can affect all 5 factors...

Here's how:

First, if you close the account, the payment history that you've had with that card won't do your help raise your score anymore. It takes open accounts that shows activity (usage and payments) in order to build credit. Usually credit cards makes up the backbone of credit because you can reuse them over time.

Secondly, you decrease the combined available credit you have versus what you owe altogether, making it look like you're borrowing more than you're able to. To build credit the right way, you should use no more than 25-30% of your combined available credit on all your credit cards.

Thirdly, closing accounts not only shorten the number of open active accounts building credit, but also it shortens the average age of accounts. Credit is designed to be used over time, and credit cards are a part of that. Closing an account, especially if has been opened longer than any account you have can instantly give the appearance that you're just barely starting out building credit.

Next, closing a credit card, can limit the types of credit that you're trying to establish. Installment credit (personal,student, auto, furniture, appliance loans, and mortages) are just a part of the puzzle when it comes to building credit. Revolding credit (credit cards and lines of credit) are the other part of building credit as well. It takes a balanced mixture of both in order to build up your score.

Lastly, when you applied for this card you lost points at the beginning whether you were going to be approved or not, because a "hard inquiry" was created. It took anywhere for a year or so for the account to report so that your score would start raising again.

What I would suggest would be to use the credit card lightly, like no more than $20 an month, and pay it off when the bill comes in and then do it again the next month. This way, you're still building credit by showing activity, but not going into debt while doing it.

Answer 2

Depends on some different factors, how long have you had the card, depending on if you have had it a long time, you may want to keep it on to show longevity. It's usually good to have SOME revolving credit. Since you have already paid it down, I would continue to make payments until you get it to zero, and cut the card up. If you don't have any type of membership fees, or maintenance fees, it could be a great way to help your score without costing you anything. Even with a zero balance, as long as the account is open, the issuer will still report to the credit bureaus, that the account is in good standing. Call your credit card company and find out if there are any fees, and if they close accounts if they are not used for a certain amount of time.

Answer 3

Keep it open and use it every so often and pay the balance in full! those credit bureaus look for longstanding accounts
payments on time and not just paying the minimum amount
NEVER be late on your payments either! I know this to be true because I am refinancing my house and your credit determines interest rate and a whole bunch of other BS so you really need to keep on top of things Another thing is that every time someone looks into you credit (other than you) the score drops at least 10 points (NOT FAIR but true!)
Seriously keep your score above 720 take care of any unpaid accounts and don't close them once they are opened Hope this helped

Answer 4

Part of your credit score is how much credit do you have available, compared to how much you used. Paying it off is good, closing after words is bad as it reduces that ratio and thus reduces you credit score. Pay it off, use it once a month for a small amount then pay it off again, that will raise your credit score.

Answer 5

If you keep a zero balance on the card, you will not gain any credit. What you need to do is make small purchases on the card every month, and pay the entire balance on the card every month. This will maximize your credit.

Answer 6

If it took you a long time to pay it off you might be better off closing it, but if you can afford to make a purchase here and there and pay it off pretty soon after, definitely keep it open.
Every on-time payment helps build your credit

Answer 7

you should keep a credit card account open for 5 years before you cancel it... looks better on your credit

Answer 8

Your credit score is based in part on the percentage of your available credit you are using. Closing your credit card account reduces your available credit and could adversely affect your credit score.

Answer 9

Better to keep it open unless you already have 3 or more open lines of revolving credit.

Answer 10

An open line of credit is always good.