Closing out credit accounts

[SagaLore]

I have a bunch of accounts with 0 balances that I don't really plan on using again in the next few years. Question:

- How is this affecting my credit score right now?

- If I close them, how quickly is it reflected in my credit report?

- If I close them, how does it affect my credit score?

:hmm:

 

[vshah]

i believe a closed account can negatively impact your score and stay on record for a number of years. i've always been told it is better just to leave the balance at zero and leave the account open.

there are far more knowledgeable people than me though...

 

[D1gger]

In general, having available credit that you are not using improves your credit score. One of the factors they look at is % of available credit utilization, so closing your credit accounts will adversely effect your score.

 

[MoPHo]

I have a bunch of accounts with 0 balances that I don't really plan on using again in the next few years. Question:

- How is this affecting my credit score right now?

- If I close them, how quickly is it reflected in my credit report?

- If I close them, how does it affect my credit score?

:hmm:

I'm not sure but I believe that a part of credit scores are available credit. If you close these, it could bring it down.

I'm not sure though.

 

[IceBergSLiM]

having too much available credit can be bad too.

 

[mshan]

I think it might reduce your credit score slightly, but have all of that excess potential borrowing capacity might make it more difficult to get a mortgage (lender may wonder if you will go on spending spree, e. g. to fix up house, when they are trying to calculate your total debt to income burden and how much of a risk you are).

 

[spidey07]

Length of credit history with accounts and percentage used of revolving credit are a large portion of your score.

You are negatively affecting both - raising revolving credit utilization and shortening credit history.

 

[SunnyD]

Closing lines of credit will overall hurt your score. It will be reported probably within 3 months of when you close it (usually the next day - anything that negatively impacts your credit finance companies see fit to screw you as soon as possible).

Leaving them apparently does nothing to your credit, but it does open you up to all the fun new things finance companies are doing to people with unused lines of credit (dropping limits, putting inactivity fees on, adding annual fees, jacking rates or flat out canceling your line). In fact, leaving them alone may improve your credit over time (length of time for line of credit is factored into your score).

Credit reporting and financing is possibly one of the best scams in the world. Nothing like turning the screws on customers' balls whether they do or don't.

 

[D1gger]

Leaving them apparently does nothing to your credit, but it does open you up to all the fun new things finance companies are doing to people with unused lines of credit (dropping limits, putting inactivity fees on, adding annual fees, jacking rates or flat out canceling your line). In fact, leaving them alone may improve your credit over time (length of time for line of credit is factored into your score).

Credit reporting and financing is possibly one of the best scams in the world. Nothing like turning the screws on customers' balls whether they do or don't.

Last I checked, my credit score was 817, but right after I received my credit report one of my credit cards companies magically dropped my limit from $40,000 to $20,000. I hardly ever use that card and never needed that kind of limit so I really don't care, but I am curious as to what effect it will have on my score when I check it again next year (I only check my score once a year).

 

[SunnyD]

Last I checked, my credit score was 817, but right after I received my credit report one of my credit cards companies magically dropped my limit from $40,000 to $20,000. I hardly ever use that card and never needed that kind of limit so I really don't care, but I am curious as to what effect it will have on my score when I check it again next year (I only check my score once a year).

I'd guess only a couple points if any change at best. Sounds like you have enough open credit elsewhere that it'd be just a blip on the map. Of course if it was your only line, a 50% drop in credit line might make more of an impact. TBH: Unless you're planning making a life-altering purchase (house, business, etc), your credit score means jack shit for the most part. It's good to have, but closing a card or two isn't going to kill you.

 

[Adrenaline]

I have a bunch of accounts with 0 balances that I don't really plan on using again in the next few years. Question:

- How is this affecting my credit score right now?

- If I close them, how quickly is it reflected in my credit report?

- If I close them, how does it affect my credit score?

:hmm:

From what I have heard from credit providers:

To many accounts is a bad thing because you can totally blow up and charge stuff nonstop if something goes wrong.

Closing out an account that you have had for a year or more really does not count against you.

It is reflected on your credit report as early as that bill rotation comes around as being closed.

You are also told that length of credit does not matter, which I found to be false. When I hit 10 years of credit, my credit score jumped over 70 points.

I closed 4 credit accounts before I bought my house (3+ years ago). Each account had been open for a minimum of 2 years. I only had 2 car notes (none now) and college loans and my credit score was over 820.

Now, all I have are a Best Buy Card and a Visa card. I carry a 5% (more or less and is the percentage suggested to carry when lenders look) balance on my visa and can pay it off whenever I want to. Best Buy carries a 0 balance usually. I have not checked my credit score in a while.

On a side note:

I work with a guy, who is about 45. He owned everything he has now by the time he was 40 and when he went to get a new truck at 42, his credit score was not even 800 due to not having to pay on anything for 2+ years. He had no credit history. So, carry a small balance on a credit card, which is the 5% I carry on my Visa.

 

[Adrenaline]

Last I checked, my credit score was 817, but right after I received my credit report one of my credit cards companies magically dropped my limit from $40,000 to $20,000. I hardly ever use that card and never needed that kind of limit so I really don't care, but I am curious as to what effect it will have on my score when I check it again next year (I only check my score once a year).

The only time this even matters is when you are carrying a balance. Lets say you have a balance of 8k at a 40k limit which is not bad you are holding a 20% balance on the card. When it dropped to 20k and you sgtill are carrying a 8k balance you are looking at a 40% balance which will then cause your credit score to go down some. But, if you carry a zero balance on it then the drop does nothing to your credit score.

 

[CountZero]

The lesson here is that credit scores are essentially voodoo magic and that two people will give completely conflicting advice when it comes to the nuances of what should be done. I'm going to go with what some else said and say that unless you are about to make a major purchase of some kind just closing out the newest cards will have a negligible impact in the long term.

 

[Gillbot]

i believe a closed account can negatively impact your score and stay on record for a number of years. i've always been told it is better just to leave the balance at zero and leave the account open.

there are far more knowledgeable people than me though...

My adviser told me the same. Last I checked my score was 815 and I have loads of open cards with a 0 balance. He told me to leave them open.

In general, having available credit that you are not using improves your credit score. One of the factors they look at is % of available credit utilization, so closing your credit accounts will adversely effect your score.

I was told, keep them under 50% and the closer to 0 the better.

having too much available credit can be bad too.

Never seen this as the case, unless you are severely over extended on existing accounts.

 

[OutHouse]

Closing lines of credit will overall hurt your score. It will be reported probably within 3 months of when you close it (usually the next day - anything that negatively impacts your credit finance companies see fit to screw you as soon as possible).

Leaving them apparently does nothing to your credit, but it does open you up to all the fun new things finance companies are doing to people with unused lines of credit (dropping limits, putting inactivity fees on, adding annual fees, jacking rates or flat out canceling your line). In fact, leaving them alone may improve your credit over time (length of time for line of credit is factored into your score).

Credit reporting and financing is possibly one of the best scams in the world. Nothing like turning the screws on customers' balls whether they do or don't.

yip, i dont give a crap if my credit drops im not going to be buying a house anytime soon and my cars run just fine. credit scores will recover. I closed out all my credit cards except for my phillips 66 gas card and my capital one visa.

 

[Caecus Veritas]

if you do decide to close accounts, make sure you leave your oldest credit card open as that will affect it the most.

also, the impact from closing accounts will vary depending on your overall credit history. if you've had say 10 years of good history with mortgage, auto, commercial loans, etc., closing some of your credit card accounts will have negligible impact. obviously, someone with only 4 credit card accounts, and only those, will suffer greatly even if 1 or 2 are closed.

another issue, as many above have already mentioned, is your overall outstanding balance versus available credit (H/E LOC will count towards this btw). even if your debt is only $1,000, if your limit is $2,000 (50% revolving debt), it will reflect negatively.