You may not know this, but a person’s credit score can be affected by a lot of different factors. One of these factors is how you handle your credit accounts. Old credit card accounts can be very detrimental to one’s credit score. If you have unused, unopened, or too many credit card accounts, then you may be hurting your credit score without even knowing it. Closing some of these accounts can be the difference between a poor credit score and an above average credit score. It’s important to note, however, that there is still potential to hurt your credit score by closing these old accounts. So make sure that you are familiar with the guidelines surrounding closing old credit account if you want to improve your score as much as possible.
One’s credit report should contain less than fifty percent of the available credit limit as well as, contain an equal balance of credit types. Determining which credit accounts to leave open and which one’s to close can be a difficult decision. Too many accounts can cause your credit report to become disorganized and cluttered. This can lead to decreases in your credit score. So in order to avoid these negative repercussions, one must consider all the possibilities before deciding which accounts to close. Closing additional, unused accounts is something that can benefit your credit score. By closing these old accounts, there are now fewer to keep track of which makes staying on top of your statements much easier. This will also make your credit report appear much neater and will significantly reduce the amount of revolving debt one is carrying. This will then increase one’s chance of getting loans approved, decrease the number of fees one must pay, and will hopefully, eliminate one’s chance of becoming a victim of identity theft.
Ways To Avoid Hurting Your Score When You Close Old Accounts
When you decide to close out old accounts, make sure you keep the oldest account open. As stated earlier, your credit score depends on a list of different factors. It just so happens that one of these factors is the amount of time that you have had readily available credit. The longer you have had an open credit account, the better it will be for your overall credit score. Your credit score can drop, almost instantly, if you close out all of your old accounts and are only left with the new one’s. So be aware of the fact that if your credit report shows a shorter history, it will be reflected in your score.
A common mistake that people make is to close all of their old accounts at once. This can cause a drop in your credit score and you are much better off closing these old accounts gradually, over time. For example, close one account every other month, as oppose to closing all five of your old accounts in the same month. Also, make sure to not close too many of your old accounts as having a variety of different cards is also vital to achieving a high credit score. A higher credit score can be reached if your credit report shows a history of responsible credit use. And as said before, for best possible ranking, make sure that each card/account has less than fifty percent usage.
Use Caution With Credit Card Consolidation
You may think that consolidating several different credit cards onto one card is a good idea because it will simplify things. However, this can often turn out to be a big mistake! It may seem like a good idea, only having to make one payment each month, but often times, consolidating all of your cards onto one account can really hurt your credit score. If you think about it, combining all of your accounts onto one card will often lead to having a balance over fifty percent of your available limit. So you need to always be thinking about that debt to available credit limit threshold that we want to avoid exceeding.
Making the decision to close out old credit accounts needs to be gone about carefully. These actions can be detrimental to your credit score, so you need to make sure that you fully understand all factors before making any permanent decisions. The last thing you want is to be trying to repair your score and actually end up hurting it. So use these tips and tricks when you go about closing your old accounts and it will ensure that your credit score is not negatively affected.
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