Close Old Accounts?

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I recently checked my credit report and realized I have several old accounts- they are all payed off and have a 0 balance. Will it hurt my credit to close some of them out?

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If anything it would help your credit to close them out. Having several credit cards or other open accounts shows creditors you have a potential to borrow even more money.

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Quote:

Can I raise my credit score by closing out inactive credit accounts?

Lenders look at your credit report to see if you are able to manage credit responsibly, but they also get a credit score from one of the credit reporting agencies. These scores are known generically as FICO scores. That's because the credit reporting agencies use Fair, Isaac & Company to create their proprietary credit scoring models.

A credit scoring model estimates your creditworthiness based on the information in your credit report. Outstanding credit lines aren't bad, but they can reduce the amount of money that a mortgage lender is willing to loan you. That's because the lender can't stop you from using those lines, and if you overextend yourself you're less likely to be able to make the mortgage payment.

According to the Fair Isaac Web site, closing accounts as a short-term strategy to raise your credit score is not recommended. Here are some suggestions from that site for improving your credit score:

Pay your bills on time. Delinquent payments and collections can have a major negative impact on a score.

Keep balances low on credit cards and other "revolving credit." High outstanding debt can affect a score.

Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix -- it probably won't raise your score.

Pay off debt rather than moving it around. Also don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.
Make sure the information in your credit report is correct. It won't affect your score to request and check your own credit report. If you find errors, contact the credit reporting agency and your lender.

http://www.bankrate.com/brm/news/cc/20020125a.asp

I had heard in the past about simply cutting up your unused credit cards, rather than closing them out. I can't put my finger on an article that states why this is more desirable as far as a credit score is concerned, but the Bankrate article reinforces my perception.

http://www.ucu.maine.edu/understandcreditscore.pdf

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I'll still vote with Linkat on this one. I seem to have heard that too much open, and unsecured credit is not good. In any case, it's just one more liability that could be compromised by a good phisher.

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In the short-term it will not help as it will remain on your record, but it was definately suggested by mortgage lenders that the less open credit cards you have the better. Just remember when a lender checks your credit ranking, they also get a list of all your credit cards and other debt instruments you have - whether you have a zero balance or not. The report will list the credit cards/debt with the current balances.

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If they are card for department stores, and you don't plan on using them, I'd close them out. It just seems like too much clutter in my credit report to have those accounts with small credit lines.

If they are major credit cards, it would depend on the number of accounts.

If you have 6 or 7 visa and mastercards out there, but you only use 1 regularly for monthly charges, I close all except that one and 2 others. The 2 I would keep would be ones that I have gotten recent offers in the mail for low rate/zero rate balance transfers.

In addition, I would use those 2 other cards once in a while, like every few months, to buy a tank of gas or something you'd pay off that month. That way, those credit card companies would see you using their cards, and send you offers you may need. Plus, it shows you are a good user of credit.

You mentioned in another thread you were in your mid-twenties, right? Now is the time to build up a good credit history, you'll never regret it once you're in your 30's 40's 50's and beyond.

Because I always maintained an excellent credit record, it's saved me thousands (and thousands) of dollars that I otherwise would have been paying in interest for big projects that have come up over the years.

Treat your credit rating as your most important asset strawberry

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One other thing I always worry about having many credit cards that are open, but not used (or even open and being used) - just additional accounts that some one else could get their nasty hands on and steal.

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Linkat wrote:

One other thing I always worry about having many credit cards that are open, but not used (or even open and being used) - just additional accounts that some one else could get their nasty hands on and steal.

That is why I shred the cards that I don't use.

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Linkat wrote:

One other thing I always worry about having many credit cards that are open, but not used (or even open and being used) - just additional accounts that some one else could get their nasty hands on and steal.

This would be my biggest concern. If you aren't using the account and someone gets ahold of your info it could be months before you knew what hit you.

If the account is closed they can't do anything with it even if they get the info. :wink:

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Phoenix32890 wrote:

Linkat wrote:
One other thing I always worry about having many credit cards that are open, but not used (or even open and being used) - just additional accounts that some one else could get their nasty hands on and steal.

That is why I shred the cards that I don't use.

I do too, however, even if you shred them - there are still account numbers associated with them - and some one may not get it off your card, but from another source.

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Phoenix32890 wrote:

Linkat wrote:
One other thing I always worry about having many credit cards that are open, but not used (or even open and being used) - just additional accounts that some one else could get their nasty hands on and steal.

That is why I shred the cards that I don't use.

They don't need your card to do damage. My daughter just went through this a few weeks ago. Someone got ahold of her card number and made their own card with her number and their name on it. My daughter is in OK and someone went on a shopping spree in Sacramento, CA.

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This reminds me, I have to pull my report again...I might have an old Sears card that's still officially open.

I'm with Chai. I keep two credit cards that are barely used, but I wouldn't want any more than 2-3 cards. If you've got a lot of them, close most of them out. It is good to have some revolving credit available for your FICO score.

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