Saturday, November 10, 2007

Closing Out Credit Cards Paid in Full Lower Your Credit Score !!!

Will closing out credit cards that are paid in full lower my credit score?

I have about 3 credit cards that are paid in full and there just sitting there. i was always told that having open lines of credit available could pose a threat to future lending loans.
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i have older ones that i would keep open and i may use from time to time, so i would still have some credit to work with, but im not sure should i close the paid in full ones or not. any advice would be great.

The Answer : I am Going to break down what makes up your score:
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1. Payment history- 35%
2. Total debt owed vs. available credit- 30%
3. Length of time establishing credit- 15%
4. Types of credit established- 10%
5. Inquiries and new accounts- 10%Having said that, now this is what happens...
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When you close accounts, especially when they're paid off, you shorten the payment history, and even worse the available credit, which give the appearance that you owe more than you're capable of borrowing. Also, it shortens the average age of accounts giving the appearance that you've established credit more recently than you have.
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Keep in mind, you can make a small purchase (like $10/month) and pay it off, to show activity every month. Remember, the more available credit, the better it reports on your credit.

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