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Old 05-23-2013, 11:57 AM
 
Location: MA
155 posts, read 294,010 times
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I have heard mixed advice on whether or not one should close a credit card account once it is paid in full. Most of what I have heard or read says it's best to NOT close it as keeping it open with little or no balance is good for one's credit score and it shows that you have the credit but don't need to use it. Then there is the opposite point of view, saying that lenders will see it as a negative because they see the "possible debt" you could have.

Thoughts?
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Old 05-23-2013, 12:08 PM
 
Location: Upper East, NY
1,145 posts, read 2,774,267 times
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The only bad mark I have running mine through creditkarma is that I don't have many accounts open (10). So, it's a net negative to close a dormant account.

If it has been open a long time, definitely keep it open.
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Old 05-23-2013, 02:03 PM
 
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The reason you mentioned for keeping it open, i.e., lenders see you as liability has NOTHING to do with your credit score. Credit score is one thing and the decision a user of that score such as a bank does is another thing.

From your credit score point of view closing an existing account affect you in two ways: 1) if it lowers the average age of you credit cards; if it is an old car better to keep it and 2) if it increases your utilizaion percentage meaning if you still have balance on other credit cards you are working towards paying it off, then by closing a paid off card, you increased your utilization rate (because now your total debt is divided over small amount of credit line) and hence lower your score. Otherwise, you are free to close
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Old 05-23-2013, 02:06 PM
 
4,020 posts, read 5,483,917 times
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Why close it if it doesn't have an annual fee?
no, don't close it, if the above is true.

your credit also depends on the duration of your credit......so a card that you've had opened for 15 years is a positive.....
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Old 05-23-2013, 03:25 PM
 
Location: On the Edge of the Fringe
5,852 posts, read 4,584,589 times
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If it does not have an annual fee, keep it open. Shred the Credit card up so that you do not use it and run up debt again. It will improve your credit rating to have the account open in good standing.
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Old 05-24-2013, 10:07 AM
 
48,508 posts, read 88,998,137 times
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Basically the hit for closing one is minimal. But as time goes on your likely to see fees with new regulations effecting accounts not used enough to pay for serving cost.
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Old 05-24-2013, 03:03 PM
 
Location: NJ
30,632 posts, read 34,663,327 times
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id say that if you have a visa/mastercard and an american express; you can close the others unless there are perks along with having them. i have multiple cards for their various benefits and always pay the balance each month. i wouldnt take action out of concern for having too much or too little credit availability. just do what makes sense for your spending.
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Old 05-24-2013, 03:19 PM
 
Location: Living on the Coast in Oxnard CA
16,276 posts, read 28,929,940 times
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First off congrats on paying off one of your cards. Now the fun continues as you pay off others.

If you have 20 cards then closing one may not matter. Lets say that you have 4 cards though and 3 are near the maxed point. Lets say that all 4 cards have a credit limit of $2,500 or total available credit of $10,000. You would be at the 75% range. Meaning that 75% of your credit is used up, not perfect but still something. If you were to close the paid off card now you have increased the range to 100% of used up credit. That would look bad. What you want to do is get under the 30% range.

I prefer the 0% range of spent credit with still using the cards to keep them in play. Just make sure to pay them off when the bill comes in.
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Old 05-25-2013, 12:18 AM
 
Location: San Francisco, CA
15,096 posts, read 12,091,683 times
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Quote:
Originally Posted by Makolly View Post
I have heard mixed advice on whether or not one should close a credit card account once it is paid in full. Most of what I have heard or read says it's best to NOT close it as keeping it open with little or no balance is good for one's credit score and it shows that you have the credit but don't need to use it. Then there is the opposite point of view, saying that lenders will see it as a negative because they see the "possible debt" you could have.

Thoughts?
Creditors are highly interested in seeing that you have credit - your past history of handling credit is a key way that they figure out if you'll be a good credit risk in the future for their loan. But they're also interested in your ration of income to credit and your timeliness of payoff, so all of those things need to be in balance.
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Old 05-25-2013, 12:30 PM
 
Location: Vallejo
16,416 posts, read 18,470,016 times
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From a credit score perspective you want a large number of accounts open but not a huge number. So if you've got 20 credit cards, close the newest of them. I have two credit cards and get dinged, having a couple more would help (or car loans, mortgage, whatever). You also want old credit. Most of my credit is fairly new so I get dinged there. You want to keep low utilization but run a balance. Credit score is about how good a customer you are, and good customers incur interest charges. One of my cards is paid off, and the other might run a small balance for a month or two. So I'm getting dinged there as well.

From a common sense perspective, of course you want a credit card open. And if you've just paid it off, exponentially so. How much do you have in savings? What if your transmission dies in your car and you have no means to pay for it because you took a pair of scissors to your credit cards in a misguided act of liberation?
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