I paid off one of my credit cards so should i close the account?

[AccountAnalyzer]

i have 2 credit cards and this time last week combined i owed $888.00 but with the payment to the Radio Shack card i now have a balance of $0 and was wondering should I close the account and focus on bringing down the $661 on my american express card?

[safari]

Don't close it. When you close an account, it makes your credit utilization ratio higher, which will lower your credit score. There is no harm in keeping accounts open, even if you don't use them.

[AccountAnalyzer]

Don't close it. When you close an account, it makes your credit utilization ratio higher, which will lower your credit score. There is no harm in keeping accounts open, even if you don't use them.

I was trying to prevent from being charged for something. So since the balance is zero I shouldnt receive anymore bills right?

[safari]

I was trying to prevent from being charged for something. So since the balance is zero I shouldnt receive anymore bills right?

Just make sure that there is no annual fee.

[DebbieL]

Depending on the billing cycle you may get another bill with interest on it. For example, you recieve your bill for say $500 dated Feb. 29 and due on March 21. You pay $500 on March 13. You would still have a bill coming for whatever interest charges accrued between Feb. 29 and March 13 when you made your payment.

When I want to truly eliminate a balance in one shot, I call the company and ask them what payment I would need to make on such and such day to close off the loan.

[InDebtInDC]

Don't close it. When you close an account, it makes your credit utilization ratio higher, which will lower your credit score.

While this may be true, the number of open accounts also affects your credit score. There are many variables involved in calculating your credit score. You try to optimize one variable and other variables will may be affected as well.

There is no harm in keeping accounts open, even if you don't use them.

I respectfully disagree for at least the following reasons:

1) Number of open ended credit accounts higher = lower credit score.

2) More chance for identity theft.

3) Some banks charge maintenance fees for inactive accounts. Always read the fine print.


Ultimately you have to decide what's best. Credit utilization is only one piece of the puzzle.

[InDebtInDC]

I was trying to prevent from being charged for something. So since the balance is zero I shouldnt receive anymore bills right?

Check with the card issuer.

[safari]

Number of open ended credit accounts higher = lower credit score.

Based on my experience and from talking to different people this is not true. I have 8-10 credit cards (too lazy to count) and my credit score is in the top 700's. I know people who have 20+ credit cards and their credit score is excellent. What affects your score is when you open a new account, but if you have a bunch of existing accounts, closing them won't improve your score.

As far as identity theft goes, even if you close your account, your record still exists at the bank, so if someone hacks into their database, they will steal your information anyway.

[poundwise]

There are multiple factors that affect your credit score and can be considered when it comes to the question you pose and few absolutes. I would never close a card that has a balance, for instance. However, once a balance is paid, the decision to keep the account open or close it must be weighed according to a few criteria.

1) Do you have other accounts with high balances (relative to available credit)? If so, you may want to keep the paid account open to keep your credit available to debt ratio lower, depending on how many and what ratio. If not, then there is no, or little, harm that will can be done to your credit score by closing the account.

2) Do you intend to use the account ever again? If the answer is a solid no, I'd be inclined to close it, regardless of any other accounts. If the answer is, no, but you have been irresponsible with credit and may (or a spouse may) be tempted to utilize it, then close it, period. If the answer is yes, then obviously, keep it open.

3) How many open accounts do you have? Contrary to popular opinion, there is nothing revealed about credit scoring that states the more, the better. In fact, it is widely held that having too many open accounts can affect you negatively. Not necessarily in a lower score but for purposes of obtaining a mortgage specifically; open/available credit is most often viewed as potential debt and factored in to the underwriting process. Another point on this subject, I recently read an article with the woman who helped develop the current algorithm used by FICO. In it, as I recall, she states that people who are looking for to maximize their score should hold two credit cards and keep the balances below a certain level of utilization (I believe she stated 30%-50%.)

4) Credit scores are funny things. At one time, I had 14 accounts with balances. As I paid them off, I closed them except one. I have that one and one that I am still paying on, which remain open. My score, over the last two years, has risen more than 100 points. Clearly, closing accounts didn't hurt a bit. Ultimately, I wouldn't try to play the game too much. If you don't want/need the card/account, close it once the balance is paid. If you aren't sure, or if you'd rather keep it open until you've paid off other accounts, then keep it open and wait.

5) Identity theft can happen anytime, however, account fraud on an existing account can only happen if the account is open. So, while it is not major concern, it is a potential issue. If someone somehow obtained my old MasterCard number, it wouldn't do them a bit of good. The account has been closed for over a year. If that account was still open, and someone got the card info, then I could be a victim of theft/fraud.

[MonkeyMama]

I personally close all old/unused accounts and my score has always run 700s/800s. I don't see any good from leaving open accounts I never intend to use again (& cards I don't pay attention to, which would leave me open to ID theft/fraud issues). The point being no can put charges on the card if it is closed.

Mostly my point being you can have a good score with scores of cards, or with only one! There is much more to the FICO picture then the # of cards.

OP - do you know your credit score? If it is good already, it won't matter much. If it is ho hum you might want to keep it open until your score improves.

Most importantly here is probably your credit utilization ratio and how long your credit history is. If this is an old card and the first one you ever had, and you are trying to improve your score, then yes, it is probably a bad idea to close it right now. (I didn't see anyone mention this part?)

If you are borrowing a large percentage of your other card, then yes, you should probably wait to close it.

Clearly there is no easy right/wrong answer.

[AccountAnalyzer]

Just make sure that there is no annual fee.

So if there is a annual fee then close the account?

[AccountAnalyzer]

I personally close all old/unused accounts and my score has always run 700s/800s. I don't see any good from leaving open accounts I never intend to use again (& cards I don't pay attention to, which would leave me open to ID theft/fraud issues). The point being no can put charges on the card if it is closed.

Mostly my point being you can have a good score with scores of cards, or with only one! There is much more to the FICO picture then the # of cards.

OP - do you know your credit score? If it is good already, it won't matter much. If it is ho hum you might want to keep it open until your score improves.

Most importantly here is probably your credit utilization ratio and how long your credit history is. If this is an old card and the first one you ever had, and you are trying to improve your score, then yes, it is probably a bad idea to close it right now. (I didn't see anyone mention this part?)

If you are borrowing a large percentage of your other card, then yes, you should probably wait to close it.

Clearly there is no easy right/wrong answer.

it's a Radio shack credit card and never really intended on getting another credit card, the clerk in the store suggested if i apply for one i will get 10% off my purchase. so i was approved on the spot and walked out with a $200 phone back in september of 2007. i didn't have to pay until december and it kind of lingered into 2008. so since i know i would never use the card again i didn't see the point in leaving the account open when i can just have my one credit card like i have had since 2006, american express. anything i can get off my radio shack card i can get off my AMEX card which makes the RS card pointless to even have

[maat55]

Last year, I bought a motorcycle and did same as cash financing through Honda credit. The cycle cost 4200, but honda opened my account with a 11000 limit. I paid the cycle off in less than three months, then closed the account.

I'm not sure if that was a bad plan, but I did not want an open line of credit with honda for 11000.

Against my wishes for the sake of a better fico score, I have a visa card with a 1000 limit as a gas card for my wife and a QT card with a 900 limit for me. I pay both in full every month.

Point, I'm not so sure that having credit just for the score is necessary, if you can get credit for the ways you choose to use it.

[InDebtInDC]

This discussion refers to my original thesis that we do not know the exact algorithm used to calculate the credit score. All we know are speculations. Nobody except the banks knows.

Based on my experience and from talking to different people this is not true. I have 8-10 credit cards (too lazy to count) and my credit score is in the top 700's. I know people who have 20+ credit cards and their credit score is excellent. What affects your score is when you open a new account, but if you have a bunch of existing accounts, closing them won't improve your score.

I respectfully disagree. This is not the scientific method to study the effect of a variables on an unknown system.

You have to hold everything else constant, and change one thing. Then you observe the effect in the system. Replicate the effect multiple times and maybe you can have some confidence that changing X causes Y to happen in the system.

In this case, closing an account increases credit utilization, but there are also other metrics that are affected. Some of these were discussed above, e.g. easy access to revolving credit, number of open accounts, etc.

For you, your score may be high, and that may be sufficient for you, but perhaps your score could be higher? If you take the position that since the score is already high so you don't about the effect of closing accounts for your personal situation, then your comments are not relevant at all to the discussion.

The only way to be somewhat certain is to close accounts and see if your score goes up. Of course the best way is to get access to the credit rating algorithm.


EVERYONE IN THIS THREAD IS SPECULATING ABOUT HOW CREDIT SCORING ALGORITHMS WORK. Like I said in an earlier thread, these algorithms are industrial secrets and are not published.

Everything I said can also be considered speculations as well, albeit they're speculations from my years of experience in the industry. If you want to discount my experience and interject your own opinion then that's fine as well. Your guess is just as good as mine to the extent that no one knows for sure.

For all we know, it may just be someboy throwing darts at a dartboard to come up with the credit score.

As far as identity theft goes, even if you close your account, your record still exists at the bank, so if someone hacks into their database, they will steal your information anyway.

This has been addressed above so I won't comment. To the extent that databases can be hacked, this risk is inherent regardless if the account is open or closed. If th account is open though, you're exposed to more risk by exposing the open account to charges.


In the end it depends on what you're comfortable with. I don't recommend trying to "game" the system to improve your credit score because you do not know how gaming may affect your credit profiles in other ways.

I suggest closing all accounts you do not use. If you insist on leaving them open then make sure you monitor these accounts and talk to your loan officer when applying for a large loan about readily available access to credit.

[Seeker]

So if there is a annual fee then close the account?

Yes, if there's an annual fee, then definitely close the account.

Why pay for something you will not use again?