Closing CC accounts, negatively affects your score

[Razorguns]

Here's shit you dont read about in those cute pamphlets.

Never close accounts. You'll lower your score.

Why? Let me cut/paste

"If you have 5 cards with a TOTAL CREDIT LIMIT of let's say $50,000 and a total debt of $35,000 in balances -

Card 1 = $15,000 limit - $12,000 balance
Card 2 = $10,000 limit - $0 balance
Card 3 = $7500 limit - $7500 balance
Card 4 = $7500 limit - $7500 balance
Card 5 = $10,000 limit - $8000 balance

You now have $15,000 in avail credit. Your balance to limit is somewhat tight but I see this as the average american household. 7 out 10 people that come into my office are pretty close to this example. Your average credit score for this example would be around 650 - 710 depending on income and payment history.
Now - you close the $10,000 limit card. You have $40,000 in credit but still have $35,000 in debt. Your DEBT TO BALANCE RATIO IS NOW REALLY BAD. YOUR SCORE HAS TO GO DOWN. WHY IN THE HELL WOULD IT STAY THE SAME OR GO UP??? YOU ARE SHOWING CREDIT COMPANIES THAT YOU CARRY HIGH BALANCES VERY CLOSE TO THE LIMIT ON ALL YOUR CARDS. KEEPING THE $10,000 LIMIT CARD IS THE ONLY THING KEEPING YOUR CREDIT SCORE AFLOAT ABOVE 650"

Credit is like drinking - know when to say when.
It is not up to Equifax or Chase or Freddie Mac to tell you when to stop getting into debt. All they want is your money(in the form of the interset you pay them)that's how they stay in busniess - it's just up to each lender to decide if you are WORTH THE RISK to lend to. THAT IS WHAT A CREDIT SCORE IS FOR. If they think you are not worth the risk - they will either charge you a higher rate - or decline the loan.

It's simple - if you don't need the account - don't open it. If you open it - don't close it - it's called math and common sense.

r

 

[jnevin]

It's not necessarily closing the accounts that negatively affect the scores, it's available credit. Better spending habits will help people avioid this whole situation. The bureaus also consider the amount of credit available as somewhat of a risk, not as significant, but a risk. This doesn't mean that if someone has three cards at 1/3 of the available balance the bureaus see it as a risk. It's more like if someone has 10 accounts with zero balances, no activity, and a few other accounts that are close to the limit.

What affects the score? In short, poor spending habits.

 

[feisty11975]

another important thing you should know...


Keep you balances at 35% of your credit limits. This will keep your credit scores up. Anything more than 35% of the credit limit and it drops your scores. This is one step towards reaching the max credit score of 850

 

[Razorguns]

It's not necessarily closing the accounts that negatively affect the scores, it's available credit. Better spending habits will help people avioid this whole situation. The bureaus also consider the amount of credit available as somewhat of a risk, not as significant, but a risk. This doesn't mean that if someone has three cards at 1/3 of the available balance the bureaus see it as a risk. It's more like if someone has 10 accounts with zero balances, no activity, and a few other accounts that are close to the limit.

What affects the score? In short, poor spending habits.

most people carry balances - and thus closing and eliminating available credit limits WILL hurt them. It lowers their debt/credit ratio.

r

 

[Spartacus]

what about those chicken shit department store cards?(e.g. macy's)
I get these for the one time shopping bonus of 20% off
pay the balance immediately

 

[feisty11975]

what about those chicken shit department store cards?(e.g. macy's)
I get these for the one time shopping bonus of 20% off
pay the balance immediately

pay the balance but keep the account open. Use it when needed and pay it off when the statement comes in.

 

[jnevin]

most people carry balances - and thus closing and eliminating available credit limits WILL hurt them. It lowers their debt/credit ratio.

r

I know how it works bro. I'm just saying this is all unnecessary if people manage their money properly.

 

[Spartacus]

I only carry a balance on an amex card
I have a locked in 3.9% rate