...ok, maybe two or three questions for you.
Here's the setup. I'm in the middle of paying off & closing a credit card account this afternoon when the representative says: "You've had your account with us for six years. Closing your account will actually hurt your credit".
Is this true?
I had some good fortune this month and was paying off all my credit and closing the accounts. I assumed this was a good thing.
Question #2
If it's not a bad thing, about how long does it take before the change will be reflected in your credit report?
(Hoping to refinance the s2000)
Thanks for any help

 

if you're just getting rid of cards because you have too many cards, then get rid of the newest cards first.

some people will say get rid of the highest interest card ones first, but i never carry a balance so i'd do the newest ones first.


it does hurt your credit a little bit, because it reduces your available credit. also because you've had the card for so long it shows a consistent payment pattern. so dropping that card hurts a little more then dropping a newer one.

paying off your outstanding credit *IS* a good thing. closing some accounts can also be good, but you do want to have a few credit cards still open to show that you can manage credit.

 

Once you close the accounts you need to get a credit report to ensure that the credit card companies have reported them closed. I was surprised a few years ago when applying for a new mortgage the credit report showed about 15 open card accounts.

 

Don't forget it may take 3 months for a credit agency to actually show any change. Always request a letter when closing anything.

Do what makes sense for you financially and don't worry about the credit agencies. You may lose OR gain only 10 points by closing that card. The big three (now 4) agencies report things a little differently. Some look at it as diminished credit, others look at it as reducing POTENTIAL debt load. Keep one card for emergencies.

Your debt ratio is more important than any of this anyway.

 

Your debt ratio in a few words is? The money you owe compared to the credit you have?

 

It's your income to debt ratio. What you have coming in compared to what you owe (and therefore what you are already comitted to repaying). Lots of things can influence credit. Applying for numerous cards, too many credit inquiries, etc. I wouldn't suggest having any inquiries run (for example seeing if you could get approved for a home loan) before going to refi your S. Also, make sure your closed accounts reflect that they have been closed at the customer's request, not the company. As someone said, get it in writing simply to have it documented should a problem ever arise.

You might want to pony up the 20 bucks or whatever and have your credit run for your own information. When I applied for the bar exam it was common for people to do this as the state bar required disclosure of all debts over $200 and would sometimes check applicant's credit. (looking for defaults on student loans, prolly) Anyway, one fellow discovered his brother's home loan was on his credit report. Errors are not uncommon. I found one on mine as well as an account listed twice. Easy fixes if you know there's a problem.

 

Not to be negative and I am too lazy to cover all points I disagree with but.....

A lot of what I read here is wrong. Your credit is your Beakon score or some derivation of it... And you can't find out the formula or even it's major components. Every one has opinions on what helps and hurts. A retailer may have a custom formula which dings you for closing a card - but I doubt closing a account could hurt. I was advised to close as many cards as possible because the more credit you have available the bigger risk you are because you have the ability to max out everything and then default. I would bet my money that the formula is closer to that then to the scenario you have...

Good luck

 

Keep in mind that the credit card company is trying to keep a good customer... you!

I think we are on track. Not even the credit agencies will give you a straight answer to any of these questions. Their answers will vary from one to another. As I said before, do what is best for you financially.


I don't want to preach but here's the best advice I ever got.

1. Pay your retirement account first.
2. Pay your bills next, the rest is all yours. If there isn't any left after your bills... you need more income or less debt.
3. Pay cash always... if you can't pay cash you CAN'T afford it.
4. Keep one credit card for emergencies.
5. Finance only things that appreciate in value. I can make one exception for cars.
6. Give inheritance while you are living. You can give $10k a year to each child tax free or set up annuities or endowments.
7. Die broke. You can't take it with you.

 

LewKeim is right--they're gonna look at your score. I believe below 620 and you might run into trouble. Point is, the things mentioned above along with payment history do influence your score (which is why you get advice like closing accounts).

Stellar advice, Ubetit. Esp. about paying cash. Good news is that this year you can give 11K per person annually and if you're married and split the gift with a spouse, you could give someone 22K! Anyone wanting to make annual gifts is welcome to PM me....

 

Here's something I was faxed over by one of the major credit agencies..