Should I Close Credit Card Accounts When I Pay Them Off?
That's up to you. It's not a question I can answer. If you don't think you'll ever use the accounts again, then it might be wise to close them. Having a lot of open credit accounts can increase the chance of identity theft, simply because you have more data circulating.
Just keep in mind that closing your old accounts can affect your credit score. Sometimes it can even lower your score. As you can see by the FICO scoring chart below, the length of your credit history accounts for 15% of your FICO score (the one most commonly used by lenders). So if you cancel your oldest accounts, you could shorten your credit history.
By paying your balances in full, you have already helped your credit score. Closing the accounts won't make much of a positive difference (if any), but it could potentially have a negative impact by shortening your history. I usually recommend that people keep their oldest credit card account open, even if they plan to close the others. This will help maintain the length of the history, which helps maintain the score. Something to consider.
Also, make sure you never close out a credit card account that still has a balance on it. You seem to realize this already, by the nature of your question. But I thought I would point it out for other readers. By closing an account that still has a balance, you reduce your available limit to zero. This makes it seem as if you've maxed out your credit card ... which in turn can lower your score. So if you do decide to to cancel an old account, make sure it has a zero balance.
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I hope that helps you out a little. Good luck with your financial future, whatever you decide to do.
Labels: credit
posted by Brandon at
9:19 AM
