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

Closing old and unused credit accounts on your credit reports can help you avoid unnecessary fees and guard against identity theft. However, it can also cause your credit score to drop if you are not careful. Here are a few do's and don'ts for closing those dormant accounts:

Do...

  • Consider closing unused and idle accounts. These accounts could be charging you unnecessary fees and are often targets for identity thieves. Close the accounts with annual fees and the highest interest rates first.
  • Check your credit reports online to see the status of your accounts. Look for late payments, high balances and signs of identity theft. As a bonus, checking your credit report can save you time by providing you with contact information for each of your creditors.
  • Be aware that you can cancel accounts that have an active balance. You can ask your creditor to close the account to new charges and continue paying down the balance each month. This may be a good way for heavy credit users to prevent new spending while they are reducing their balances. However, watch out for hidden fees.
  • Keep four to six credit accounts open. This will keep your credit score and debt balances healthy. Signs of active and responsible credit use are viewed positively by creditors.
  • Designate one card for regular use and try to pay the balance in full each month. Reserve the other cards for emergencies only so that you are not tempted to overspend.

Don't...

  • Close the oldest account on your credit reports . This could cause your credit history to appear shorter and could harm your credit score.
  • Just throw away old cards and expect your accounts to close automatically. The safest way to close an account is to send a certified letter to the customer service department of the credit company. You should receive an account closing confirmation letter in 10 days.
  • Be pressured to cancel several accounts all at once. Gradually paying down and closing accounts may be the best plan if you are unsure about the impact on your credit score or the amount of debt you need to carry. If you want to cancel numerous credit accounts, spacing the closures over time will reduce the chance of attracting negative suspicion from potential creditors.
  • Over-consolidate balances onto one card. If your credit balances rise to above 35% of your available limits, you may see a drop in your credit score.
  • Forget to check your credit reports for updates and errors after you close your credit accounts. Wait 30-60 days for the creditor to report the closed account and the credit reporting agencies to update your records. While the accounts and their payment histories will stay on your report for 7 or more years, they should be marked as "closed."


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Helpful to 12 out of 14 people

 I've got a question. I paid off all my credit cards and a small bank business loan last in

sept. One of the credit cards was one in which I  opted out since they were raising everybodies interest rates after the credit reform act. (Go fifure). Why did my credit raing go down? I also had a bankruptcy come off at it's 10th anniversary in July. Why do I not see an increase in my score? Also, I may trade in my car for another,. Will the inquiry hurt me? Will the trade help or hinder?

Comment by
cowman18

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Helpful to 12 out of 23 people

"APPLES TO APPLES..."; NO BLANKET STATEMENTS CAN BE MADE REGARDING HOW CERTAIN VARIABLES WILL AFFECT ONE'S CREDIT SCORE...each situation is unique and it is of critical importance to realize you will NEVER understand credit scores if you do not understand this concept.  NEVER...If you do not understand it is okay b/c this seemingly simple concept it is actually quite complex.  With that said, not all hope is lost as certain generalties can still be deduced.  Here is what  we know (we think): 

1) All credit cards + small business loan were paid off and credit score  went down...Why? -To illustrate the importance of the aforementioned concept, here are some of the just some basic factors that do not qualify me (or anyone) to make any blanket statements (what does "all credit cards" really mean? how much total credit card debt was paid off or down? how many diff trades (cards) were paid? what was (now what is) the utilization rates? was there previous delinquency on some/all accts? what degree of delinq? what status was (now is) those accts in? are they open, closed (initiated by you or by the bank)?...You get the idea and I'm not even going to introduce bankruptcy into the equation...bottom line you do not have to know all these things to understand credit (just knowing that you dont know)...

Reply by
ibrown4

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Helpful to 4 out of 4 people

I know all of the credit score formula rules and guidelines used are unfair when appling traditional and responsible financial behavior values. There in lies the problem.  These scoring rules do not look to achieve a score that reflects how "debt free' or "finacially prudunt" you are.  These rules are designed to identify and reward people that are "active" ongoing debtors and how reliable they are in this lifestyle.  A person that is always is debt and is very reliable at constantly paying on debt is the goal or the best debtor.  If you have no debt and have no visible track record of constantly paying on debt, you are an unknown and therefore a risk. For instance....if you have 4 credit cards at a contant 10% utilization balance, a 5 year car loan at 40% original balance, a personal loan at 20% balance, a mortgage and have never had a late payments you are a golden debtor.  On the other hand, if you have paid of you car loan, mortgage, personal loand and all credit cards.....no matter how accelerated or honorable and prudent you were in achieving this goal.....you are now a risk.  I do not know how you can handle debt right now.....you have no debt loan active NOW that I can analyze.  Credit scores are creared to reflect ACTIVE debtors risk....no debt to analyze means more risk....current debt behavior has more value than older  paid off historical debt.

If this is how the credit scoring world must be so be it.  The trully deplorable side of this is where credit scores and used.  YOur credit score affects not only your ability to aquire new debt, it affects you car insurance costs, your ability to get a job even you ability to get rental property....the list is endless if someone is willing to pay for a credit report on you.  As a result, if you are late on paying a department store credit card for the pair of Dockers pant you bought...in theory...and in practice...you could pay more for your car insurance or be viewed and a hiring risk!!!  This not only is terribly unfair and devasting to a persons life, it has a very negative impact on the economy overall.  Too many lates on a credit card and you can lock yourself into a downward financaial spiral you can never fight your way out of.  Late on credit payment...tehn can't get a job....don't have money....borrow more to survive.....can pay that debt...credit gets worse.....then bankrupt....then you are in a terrible position ofr 10 years....life ruined.

Think of it this way....if you were a great baseball player that has played for 10 years, was a starting player every game,  and was considered the best hitter in the game you would get the best contract and salary in the game.  If you were a player that played only 25% of the season, played great or fairly well but also sat out 75% of the time, you will NOT get the best contract.  It is all about risk and CONSTANT performance.  If you want a great credit score stay actively in debt AND behave flawlessly as a debtor.

Comment by
kcopa01

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Helpful to 4 out of 4 people

This article is bad advice. Closed accounts are still included in a true FICO score for 10 years. So, closing an account will not reduce your AAoA any time soon. The closed account will no longer be factored into your utilization ratio, so closing a high limit account when your balances are high on other accounts is a bad idea.

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Comment by
dustinkirk

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Helpful to 11 out of 13 people

Does paying off 2 credit cards in collections help raise your credit score?  

Comment by
cmberg77

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Helpful to 20 out of 22 people

no infact you should try a pay for delete everytime you pay on a derrogatory mark you renew its time it will be listed on your credit report the older the mark the less it hurts you. Say you have a $500 debt thats been on report for 4 years you pay it off well now its renewed to the date of paid off which would be new activity so the time it stays on your report is refreshed. Newly & refreshed derrogatory marks hurt you more than leaving it.

Never settle fight to get things removed most places will do a pay for delete option they just want money get it in writing and your golden.

Reply by
stickz

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Helpful to 10 out of 11 people

It may or may not.  It will give you a lower utilization which should raise your score.  Depending on how long since last payment it may or may not be worth it (5+ years).

Paying them off may help, but will not fix your credit.  The original deliquency will still show.  Your credit will imrprove over time if you are patient and use it wisely.

Reply by
videogamesaremylife

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Helpful to 11 out of 13 people

what do you do about things that are already in collections? is there any way to repair/settle those without damaging things worse? I found a collections for an apartment we lived in saying we owed them money to replace carpet,even though we had a walkthrough and they knew the carpet was old when we moved in,so I contacted them and paid it anyways with the understanding that it would be removed from my credit,I was denied an apartment and didn't even know about the debt...its still on there,anything I can do?

Comment by
nichols724

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Helpful to 9 out of 10 people

The first thing u should have done was dispute the charges with the credit bureaus, you should not have paid the charges as this is deemed an admission of guilt.The fact that u did a walk thru with ur landlord at the end of ur lease is enough proof for the credit bureaus to take ur side, shady landlords are a dime a dozen,next time take photos when moving.i hope this is helpful. 

Reply by
dub12345

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Helpful to 13 out of 16 people

I am just sick to death of FICO. I've stopped using credit cards that date from 1982, closed accounts and now my 'oldest' credit card history is 3 years and some change which gives me a lower score. Forget that I'm being responsible and NOT utilizing credit. HA!

FICO can pound dirt!

Comment by
Mostlysunny

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Helpful to 3 out of 3 people

Good or bad score, I feel alot better about paying off my debt, I too just got done paying off all my debt. Yeah my score went down, but so what. I have a few less phone calls and more money to spend one other stuff. I can now save what I spent on my debt and pay for whatever I want with cash and you don't need a credit score for that. Take it from me, if you can pay off a bill or two do it.  A score is only a number, and collection agencies do not care what your score is.

Comment by
egray38

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Helpful to 9 out of 11 people

Okay my credit score is horrible it is a 538. I pulled my credit report and I have small items on my report. I do not have any credit cards just old debt such as cell phones. I am trying to get my credit together and I have read on post that I should not pay off old debts and everything on my credit is old and I have not got any new debt, so how can I get my credit score to go up if paying off my debt will possibly lower my score HELP

Comment by
deatmon

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9 People Helped

Not paying old debts is not correct. While you may see a small short term decline, the long term benefits outweigh the cost. Basic advice is get current. Then try for a secured credit card which will help rebuilding your credit.

Review by
CK Moderator

Helpful to 44 out of 44 people

send out "pay for delete letters". you can search for pay for delete on google. most companies will delete the account off bureaus if they are paid. get everything in writing first before paying them. do no validate the debt. I got 21 negatives deleted. went from 515 to 701 score in past 9 months as a result. open a secured card, i used orchard bank so you have a good history when you get everything off. remember no PFD or validate , no money paid.

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Reply by
nbirnbaum2

243 Contributions
356 People Helped

The small items are from like 2005-2007 and its stuff for like $38, $64, $85 and it is cell phones and a couple of medical bills

Reply by
deatmon

2 Contributions
9 People Helped

How old are the "small items"? And how much?

Reply by
txredneck

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Helpful to 5 out of 6 people

According to my credit report, I have 10 accounts on file, I am only aware of 4. How do I get of list of all credit accounts in my name?

Comment by
KERN202

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You can view your detailed credit report at AnnualCreditReport.com. That is the free government site.

Review by
CK Moderator

Helpful to 2 out of 2 people

I paid off my home and my credit score went down, because it closed the account, being responsible and paying off debt should be rewarded but it is not. There is no method to the madness.

Comment by
fishjb1

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Helpful to 2 out of 2 people

I feel ya, I just paid off my car (the reason I got a car loan in the first place was to boost my credit score) and my credit scores dropped significantly. So NOT cool. I too thought it would make my score stay the same or boost it a little not knock me into the red. This whole credit worthyness stuff is a bunch of whooy!

Reply by
Corington

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