The Do’s and Don’ts of Closing Old Accounts

I so agree,why should you be penalized for closing your accounts. I beleive if you close accounts they should give you points, not decrease your score. Believe this or not:
I had 4 active accounts that I paid off, one at a time. Once I paid it off, I closed the account. To my surprise my credit score went higher. It maybe that I didn't close them all at once (it took me 1 1/2 yrs). I personally just feel better knowing the account is closed. If I get a decrease in my score so be it, am sure that it will increase over time. It's funny how the credit system works.
I have 2 more accts that am going to pay in full and close this year also. Oh well, let the chips fall where they may. Good luck to all!

Agreed.

I also thought that closing unused account would be seen as a good thing.  I think the rationale behind scoring higher for unused credit lines is that you can manage those account, and are able to hold back on spending even if you have approved credit.  It also shows that whatever you use up you end up paying back, and are not in a trend of using up all the credit available to you.  Not sure if it's the best way to measure this, but I guess it does have some sort of logical basis. 

I also agree.  If you keep all card accounts open, you could me tempted to used them more often then needed.  I have a friend that closed two credit accounts and aand did a transfer of the balances to new card and one year later starting using the other two acounts again.  What a shame as she is in debt for 3 cards now.

One factor in a credit score is the ratio of debt to total credit. You need to keep this lower than 35%.  For example, if you have four credit cards with a line of $2500 each ($10k total) and your combined balance is $2500, you are using 25% of your total credit line. Now if you cancel two of those credit cards (assuming they had $0 balance), your credit line drops to $5k and your debt to total credit available is now 50%. Using 50% of your credit as opposed to 25% of your total credit looks bad in the 'eyes' of the credit agencies. Keep old lines of credit open. It's a sign of committment. I'm still paying off Discover from 1995 ($1400 more to go). They just 'rewarded' me with a new card with a $7500 limit. My old card has a limit of only $6900 (it was $5300 last November).

When you close out old accounts,whether you use them or not, It reduces the amount of credit available to you. That is why your score could go down.

I fully agree with you. Now that my credit is so much better I closed out 2 accounts that charge me 59 dollars a year to have them and I applied for and got 2 cards with no annual fee and my credit score dropped about 40 points. Very Unfair I think. They should look at the entire picture. I was not about to pay over 100 dollars for something I didn't need and now I am being penealized for it..

It has always bothered me that if, for example, you are approved for $10,000 ------- anything over $3,500 is view as a negative impact.

If creditors are happy, up until you spend 35% of your available credit... why don't they only approve you for $3,500 to effing begin with? Mother bugger sons of boogers... That just seems so stupid to me.

its the ratio between the amount of credit you have and the debt amount that you have - that is what can potentially knock your score down. as long as your debt is less that 30 percent of the credit you have allotted to you it doesnt matter.  of course the credit length history plays into that as well.

Remember the credit score is not a measure of wealth.  It is a measure of your willingness to go into debt stay in debt get more debt and have a excellent pymt history.

You explained that beautifully. Thank you.

The credit bureaus have been closing my good closed accounts little by little.  I've had several installment loans that have been paid with a timely payment history be deleted without my request.  Why is this happening? I've had one closed car loan disappear and two paid mortgages be deleted, too.

My Experian Credit Report is nearly a thin file due to this. And it's nearly impossible to have a creditor report the account again. It's very difficult not to believe that the credit bureaus are doing this to artificially keep credit scores low.

But here is the logic for the creditor. Be sure to read the fine print because if the creditor assign you a credit limit of $10,000 and you use over 35% of your limit along with the credit balances of your other accounts, your credit score will probably decrease.

Since you score has decreased, you have become a greater credit risk. Consequently, your interest rate will probably be increased leading to hefty profits for the creditors. Yes! It is a conspiracy.

I am at a loss - I have a "D" on one of my responses apparently because about 9 or 10 years ago I closed several credit cards I did not use.  I THOUGHT this would improve my Credit, not hurt it.  It says I currently use 4 credit cards, I pay off the balance each month.  Can you give me an answer why my score is "d"?

You could also ask the credit card company to change your credit card type to a non annual fee one. I did with 3 of my credit cards, and all of them said yes and changed to a "free" card, two of them are giving me "points" now.

i dont,then everyone will closing account that they cant pay and getting rewarded for dumping their balances for points?its not reasonably.you close your credit it decreases your available credit,therefore decreases your your score.act responsible then maybe the whole world economy would not be crashing .cant affo

My credit reports don't show my first cards.  I've had credit since 1976 and my  credit reports only show about 10-15 years.

@lawdog46 (Just read the article so I'm not sure if you're still curious why this is, but here's my response). One of the ways credit scores are calculated is through percentage of use. For example, you can borrow $10,000 total on all accounts and you only use $3,000 you're in a good spot because you're using 30% of availble credit. If you close a card you aren't using, then all of a sudden you can borrow less but still perhaps owe $3000. Your percentage drops. Another reason it may drop is because the length of time is another factor in your score and if the card being closed is extending your length of time then that will also drop your score. Hope this helps someone!

Thank you for sharing your exsperience I am so happy we are able to have a say in our credit these days. I remember when you aplied for credit somewhere they would not let you even look at your credit report. That just does not seem right what if something was incorrect.

If they are not inaccurate, then you can simply keep going without missing any payments and keeping up with the 'good habits'.  They will stay on your record for about 7 years, at which time the account will go back to good standing unless you make another mistake.  At least that's what I've been read.

How about innaccurate and illegal collections that have unknowing been there a while.  Will this cause the account to show improvment?

Sue in small claims. The debt collector, if there was one, and the company that illegal tried to collect the funds. Show the damages of how they hurt your credit score. It will either win you money or get it removed promptly.

If you have stuff on your credit that isn't yours it could be a simiple mistake. Example, my husband had a home mortgage (he's never owned a home) and a bunch of college loans on his account. his cousins name is spelled the EXACT same other than middle name. My brothers ssn is 1 number off from mine and i got a bad report from his credit. If it isn't yours dispute it through the credit bureau. If they don't take care of it (which if it isn't yours they should)  then you should sue or whatever you feel is more accurate!

You have the right to get a credit report from all three major credit bureaus once a year at annualcreditreport.com, check it out!  I would just get a report from each one of them every 4 months to keep monitoring.  

I do this every year religiously. Great recommendation!

Why not close one and see what happens. If your score goes up I would wait 6 months or more & then close one more & see what happens. They say to close the one with the highest interest rate... I agree. Plus if you call to tell them you are closing the acct due to the high interest rate, they might even reduce it for you.