Posted on: 24th Mar, 2009 03:41 pm
Well, I have just finished paying off a bunch (like 7 or 8) of credit cards that I had run up to near their limits. After paying them all off, I went through all of my cards and chose about 8 of them to close. I have closed them and destroyed the cards. I only kept about 5 or 6.
So, my question is, how and why should canceling several credit cards at once cause damage to my FICO score (somebody told me it would)? That seems counter-intuitive to me. It means that I have much less potential credit open to me, thus reducing my risk of over-extending myself, so shouldn't that work in my favor? In addition, my credit report will show very low monthly payments being due. I chose to close the accounts; they weren't closed for me by creditors. I guess I just don't understand, so can anybody explain this phenomenon and the logic behind it to me?
Thanks,
Bobby
So, my question is, how and why should canceling several credit cards at once cause damage to my FICO score (somebody told me it would)? That seems counter-intuitive to me. It means that I have much less potential credit open to me, thus reducing my risk of over-extending myself, so shouldn't that work in my favor? In addition, my credit report will show very low monthly payments being due. I chose to close the accounts; they weren't closed for me by creditors. I guess I just don't understand, so can anybody explain this phenomenon and the logic behind it to me?
Thanks,
Bobby
Hi bobby,
Closing your credit cards can negatively affect your credit score. It may lower your credit score. You should remember that closed accounts are not removed from your credit report. The credit report will display the payment history on closed accounts and it will also be considered in the calculation of your credit score.
You should also note that closing an account can also alter your debt utilization ratio. It is the amount of credit available to you compared to how much you owe. Closing an account will lower your available credit which will increase your ratio. This will lower your score. The older the credit card, the more value it would carry.
Thanks
Closing your credit cards can negatively affect your credit score. It may lower your credit score. You should remember that closed accounts are not removed from your credit report. The credit report will display the payment history on closed accounts and it will also be considered in the calculation of your credit score.
You should also note that closing an account can also alter your debt utilization ratio. It is the amount of credit available to you compared to how much you owe. Closing an account will lower your available credit which will increase your ratio. This will lower your score. The older the credit card, the more value it would carry.
Thanks
Closing your account will hurt your score as it limits ur entire credit limit. Paying them off is really good but if not necessary dont close them as it lowers your fico score.
This is true. Keeping the accounts open and them being paid off is the best thing you can do. If you close them your credit score will fall dramatacially.
Here is the scenario......
If you had 8 cards and they had credit limits of atleast $2k a piece. Then all of them were almost max, you would have $16K worth of debt and no credit avaliable. That looks bad to creditors. You may be paying on time, but you have a very high debt to credit ratio and if you need more credit, even though your score is may be high from paying your minimum monthly payments on time. They will look at your debt to credit ratio and consider you at risk.
Consider this:
If you had 8 cards and they had credit limits of atleast $2k a peice and you only use 2 of them. The two that you use, you only use them for emergencies and they only had balances of about $200 on one and $700 on the other but you paid the entire balance off each month.It shows you have avaliable line of $16K and a debt of 700+200=900. Your debt ratio is 5% and that looks great to the creditors.
So in other words it improves your debt to credit ratio which improves your credit score and shows the lenders out there that you are responsible and you know how to manage your debt. Even though it is there you don't have to use it.
Here is the scenario......
If you had 8 cards and they had credit limits of atleast $2k a piece. Then all of them were almost max, you would have $16K worth of debt and no credit avaliable. That looks bad to creditors. You may be paying on time, but you have a very high debt to credit ratio and if you need more credit, even though your score is may be high from paying your minimum monthly payments on time. They will look at your debt to credit ratio and consider you at risk.
Consider this:
If you had 8 cards and they had credit limits of atleast $2k a peice and you only use 2 of them. The two that you use, you only use them for emergencies and they only had balances of about $200 on one and $700 on the other but you paid the entire balance off each month.It shows you have avaliable line of $16K and a debt of 700+200=900. Your debt ratio is 5% and that looks great to the creditors.
So in other words it improves your debt to credit ratio which improves your credit score and shows the lenders out there that you are responsible and you know how to manage your debt. Even though it is there you don't have to use it.
Good answer Tawana.
Just cut your cards and do nto lcoe the account. Unless it is some cards from stores like BestBuy or similar
Just cut your cards and do nto lcoe the account. Unless it is some cards from stores like BestBuy or similar
My creditor closed my account I have never been late they would not tell me why they said they get a credit report each month but if I pay them on time what does that have to do with it?
Please check you credit report and see if you see some thign wrong.
some thign shoudl ahve triggered this.
some thign shoudl ahve triggered this.