subject: Old Credit Card Accounts: How They Can Affect Your Credit Score [print this page] Credit card accounts can be one of the many factors that can affect your credit score. Some of these factors include having old credit card accounts that aren't being used or having more cards than you need (or can handle). Closing these accounts can definitely help improve your credit score. However, understanding the guidelines around closing old accounts is very important. In some cases, closing old accounts can actually hurt your credit score, so make sure you are fully informed for the absolute best credit repair and credit score improvement achievable.
Ideally your credit report will contain a nice balance of credit types, with less than fifty percent of your available credit limit being used. Too many credit card accounts can clutter up your credit report and harm your credit score, but there are some factors you need to consider before you determine which credit card accounts to close. Closing out extra accounts which are no longer used can offer many benefits. It is easier to keep on top of your available credit cards and statements, because there are fewer of them. Your credit report looks better and appears cleaner, and the amount of revolving debt you are carrying will be smaller so your chance of a loan approval is much better. In addition, keeping credit card accounts open that are no longer being used could cost you quite a bit in extra fees, and will increase the risk of becoming an identity theft victim.
Ways To Avoid Hurting Your Score When You Close Old Accounts
In some circumstances you should close out old credit card accounts, but always make sure to keep the oldest account open. Your credit score depends on many different factors, and one of these is the length of time that you have had credit available. The longer it has been since you had your first credit account the better it will be for your credit score. If you close out the oldest accounts and only keep new ones open then this could cause your credit score to drop. This happens because your credit report shows a shorter credit history of open accounts.
One mistake that many people make when making the decision to close old credit accounts is to close too many at one time. Doing this can seriously affect your credit score. Make sure that when you decide to close those old accounts, you are doing so over a period of time. An example of this would be closing one account every month, instead of closing all of your old accounts in the same month. You also still want to have a decent number of active accounts. This is very important if you wish to reach that high credit score. Showing a history of responsible credit use can be the difference between a great credit score and a poor credit score, so always make sure that you are not exceeding more than fifty percent of your available credit.
Credit Card Consolidation: Proceed With Caution!
Often times, people think that consolidating all of their credit onto one account is the way to go. This is often a big mistake. You may think that only having to make a single payment each month will make your life easier. It may, but what you are missing is the fact that when you consolidate all of your credit onto a single account, you are going to exceed the fifty percent credit limit threshold. This can often lead to a much lower credit score.
It may not always be the case, but closing out old credit accounts can be a good thing for your score. Always remember though, if you make misinformed decisions when going about closing old accounts, your credit score is going to suffer. Just use these simple tips before making any decision on whether or not to close an old account. This will ensure that you are achieving the highest possible credit score according to all relevant factors. This will also ensure that you are closing your old accounts properly and not having your credit score being penalized for doing so.
