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The Negative Effects of Closing Credit Card Accounts

By Karen Anderson
Published: Friday, December 25th, 2009

There are many companies out there that claim to have the capabilities to increase credit scores and repair credit reports in a flash. However, the lucrative nature of credit repair and troubleshooting business makes it very attractive even to those who would opt to make money from wrongful means.  If there is one most commonly advised wrong strategy in increasing credit score and repairing one’s credit report it would probably be-to close unused credit card accounts.

This is one of the widely spread wrong credit report tips simply because fraudulent credit repair companies can make it sound reasonable even if it causes more damages than to maintain the use of the credit card account. It is true that it is effective in increasing credit scores in the short run; however it will cause irreparable damages in the long run. Explaining the wrongness of this credit report tip falls on two major reasons- it falls off and it hurts utilization measurements.

Genuinely correct and reliable credit report tips will not advise the closure of credit card accounts because of the very nature of credit report documentation. It is a common knowledge that credit reports are actual historical documentations of an individual’s credit history combined with personal information, payment history and even debt settling capabilities.

Effective credit report tips would pertain to other methods and tactics in improving credit reports and credit scores like good payments, credibility in debt settling and even hiring credit repair companies, but not the closure of existing credit incurring accounts.

The historical nature of credit reports need to take care of credit history to be able to establish precedence in assessing the credit worthiness of an individual. Closing a credit card account, furthermore, a credit card account with good bill settling record is unadvisable because in the long run it will fall- off the credit report of the individual.

The historical accounting of closed accounts regardless of the merits it may have will eventually fall of the credit reports as if it did not happen at all after seven years. Your good settled credits will not be reflected in your credit reports after seven years which means that even the best settled credits found in the closed credit card account will not bear anymore good points in your eighth credit reports and score.

Reliable credit report tips would equally explain the bearing of closing credit card accounts in relation with utilization measurement. Utilization measurement shows the proportion of credit limit and the balance amount on our credit card account. This ratio measures the extent on how does the credit card holder uses his credit card; this measurement is also an implicative measure on how timely does the credit card holder pays his or her bills.

The utilization measurement bears almost the same weight as the credit score in the documentation of one’s credit report. The closing of unused credit cards will increase the utilization which in return will decrease the scores and worsen credit reports.

Credit report tips prescribe to avoid closing unused credit card accounts because it ma erase your credit history and it increases your utilization measure. These reasons if not taken seriously will tremendously affect the credit report, even the credit worthiness of the credit card account holder negatively.

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