Most of the auto loans applicants usually take advice from credit consultants
, lending pundits and dealers on how they can improve their credit score and then get approved for the loan. Most of these advisers are experienced and know what they are saying and also judge the capability of the borrower before telling them what should be done to get the credit score up. However, some of these advisers are inexperienced and sometimes give faulty advice on purpose or accidentally which can lead to further damage to credit score. One such harmful advice is closing down old accounts.
Some lenders tell their clients to shut off old accounts as it reduces the paperwork involved and also doesn't show up their old accounts on the auto loans procedure. However, most of them don't recognize the harmful consequences of doing so. Bank accounts contain a lot of data and information regarding the earning and saving capability of the applicant. Closing them off entirely eliminates what little history they had of making transactions. Of course, that portion cannot be judged by the credit bureau but it also takes away what little pros it had. For example, closing off bank accounts eliminates the dealings that one had with that account such as credit card payments, bill payments etc.
Lenders wish to gain more information on their client's payment history and closing off accounts doesn't give them a chance to judge that. Another disadvantage of doing this for auto loans is that the applicant is cutting of his/her ties with that bank. Aside from their usual consumers, banks give a lot of preference to their personal clients and provide them finances at a reduced rate or general rate because they know about the applicant. This means that closing the bank account would close off the chance to get auto loans at a decent rate of interest.
