It is a common misconception that closing multiple credit accounts will increase your credit score. This is not necessarily true as the credit bureaus, as well as lenders, like to see that you have a positive long term history with your credit accounts. For example, closing a credit card that you have had for the past 10 years will likely hurt your credit score. Furthermore, after closing a credit account it may be tempting to open a new one when faced with the difficulties of having access to a decreased amount of credit. If you then choose to apply for new credit, it is important to realize that the new credit will then negatively affect your credit score as potential lenders check your credit score, and in the process create soft inquiries.
If you do decide to close a credit card account, we suggest that you write a letter to your credit card company where you suggest a hard close. By default, they may close your credit account using a soft close, leaving you vulnerable to credit card fraud as new charges can still go through. Also, ask your credit card company to report to the credit bureaus that the card was closed at your request. Having an account listed as closed by creditor, will hurt your credit report. After 30 days check to ensure that the close was done as you asked.
The best credit repair companies will eliminate the need to create multiple accounts for the purpose. You should collect complete information about the reports creation. Ensure that the services are the best one for the repairing of the credit score. A report is available to have the desired results in credit repairing.
lf you have unused credit, or if you have too many credit lines, then by all means pay off some and close them. This will likely improve your credit score, as long as long as you don’t close long-term accounts you need. It is wise to close your most recently opened accounts first, and only when you are positive that you will not need access to that credit in the near future.
Closing your credit accounts is a bad idea if:
You will be applying for a loan soon
In the short term, closing your accounts will decrease your credit score, and may make it difficult to qualify for competitive rates on loans.
Your debt to credit ratio increases
Your debt to credit ratio is a measurement which compares how much debt you currently have, with how much credit you have access to. For example, if you owe $5,000 and have access to an extra $5,000, then your debt to credit ratio is 50% ($5,000 owing from a possible $10,000). This is a healthy range as you are not very close to maxing out your available credit. However, if you close a few accounts and are only left with access to $1,000 credit, then your debt to credit ratio will increase to 83% ($5,000 owing from a possible $6,000). This brings you closer to maxing out your available credit and in turn hurts your credit score. In general, the lower your debt to credit ratio the better. Below 50% is a good benchmark.
