|
|
| *Ostroff, Fair and Company>>>Credit |
Canceling a Credit Card Open Less than 12 Months? |
I've recently heard it impacts your credit score negatively if you cancel a credit card open less than 12 months. I know that it's best to keep ones open which you've had the longest, but this is the first I've heard of this 12 month rule. What have you learned? my understanding is that the more credit you have the higher your score and the more credit you'll recieve......leave the card open.. wont make a big deal by itself, it will show canceled by consumer...no worrys mate! It can lower your a LITTLE. Not enough to hurt you or make a difference. Especially if you do it only once or twice. If you are opening like 10-20 cards a year and cancelling all of them you would see your score a take a big hit. But in this case, were talking a minor drop. Credit card companies try to scare people into thinking their credit rating goes to hell if they cancel accounts.. not true. There is no 12 Month rule that I am aware of. However, it could effect your score for the following reasons. First make sure you pay it off before closing it. If this is your oldest card, you have lowered your average credit age. As you already know one factor in the credit scoring is how long you have had credit. The longer you have an account open the better it looks. The second is your credit utilization. That is your total credit used compared to your total credit available. Ideally you need to keep this under 30%, once you go above that it will start to hurt your score more. So for example if you have a total credit limit of $5,000 and have used $1,000 your utilization is only 20%. However, if the card you close has a limit of $2, 500 your utilization has shot up to 40% so your score will go down. If you do close out your card be sure that your report shows closed by consumer and not closed by credit grantor. As you want to make sure it was known it was closed by you. it will hurt your score because u need to show history that u can make payments on time.. And if u close it that's not enough history OC's right about closing accounts can affect your utilization (debt to available credit) ratio and the average age of accounts. But also think in terms of this. When you initially applied for the card, your score dropped several points because of the hard credit inquiry whether you're approved or not. It takes roughly a year or so to get those points back while the payment history on the new account develops. Closing it at this point, will mean that you wasted points for applying, getting approved, building some payment history for nothing. credit analyst/underwriter |
| Tags |
| Investing Insurance Credit Corporations Other - Careers & Employment Technology |
Finance Categories--Copyright/IP Policy--Contact Webmaster |