Sometimes I think I’m writing a Credit Score advice column… Credit is an important part of getting a house, and many people are ready to take control of their credit picture, make some changes, and buy… the problem is that there’s so much DIFFERING advice about what you should do to ACTUALLY improve your credit scores.
If you are looking at your credit report and you think there are some credit accounts that need to be closed, here’s our advice:
Don’t Close Accounts that have a balance. When you close a credit card that has a balance, your total available credit is lowered to $0. Since you closed an account with no available credit, it looks like you are maxed out – and you just lowered your score!
Don’t Close Your Only Credit Card with Available Credit. For purposes of “emergency” preparedness – doesn’t make sense. It also will decrease the total available credit and just like the point above – it will decrease your score! (HINT! If you are an impulse shopper – like me – having that extra card could be a CURSE! Put it in your safe deposit box… or do what I did and FREEZE IT in a block of ice!)
Do not close your ONLY Credit Card… having different types of credit will improve your overall score. But remember, that there are SOME credit cards that are just plain better for boosting a credit score than others.
Do not close your OLDEST Credit Card Account. Your credit history makes up a large part of your score. Lenders tend to view borrowers with short credit histories as riskier than those with longer histories.
Do not close the credit card with the best terms. Why let a good thing go? If you have a credit card that has a low interest rate, no annual fee, and other perks like travel insurance, keep it. A credit card that charges you less for making purchases is far better than one that charges you more.
It’s ok to close out a newer credit card that you no longer use as long as the card does not have a balance and you have other credit cards. We believe that you need to have three Open Credit cards.
In identity theft and fraud situations, your creditors will advise you to close the credit card to keep the thief from damaging your credit even further.
The proper way to close a credit card is by sending a written notice to the card issuer. For your records, you should request written confirmation that the account was closed in good standing.
You should be just as selective about the credit cards you close as the ones you open. Before you pick up the phone to alert your creditor that you want to close your account, make sure it’s not going to affect your credit score in a negative way.
Here’s some more information about Secured Credit Cards too – we HIGHLY recommend these if you don’t HAVE any credit cards. Looking for a USDA Home Loan – they are looking for 12 months of “Clean Credit.”