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Credit Score News, Tips & Advice « Credit Scores > Credit Score Advice > Why You Shouldn’t Close your Old Credit Accounts

Why You Shouldn’t Close your Old Credit Accounts

By Brian Anderson
Published: Tuesday, December 22nd, 2009

Earning a good credit score is not as simple as creating one. Knowing which credit score advices to follow can surely help you create and more importantly, maintain a good credit score. However, there are some advices that circulate that you must not follow.

One such advice is the misconception that closing accounts can help your credit score. Always remember that closing accounts can never help your credit score, and in fact, may even hurt it. Be wary of this wrong credit score advice. Some mortgagers will recommend you to do this. However, while it is true that having too many accounts will hurt your score, closing an account can actually make things worse.

First and foremost, the credit score looks at the difference between your available credit and what you’re using. So when you shut down accounts, and your total available credit shrinks, your balances will look larger, and in turn will damage your score. This is basically the warning that you must take note when encountering such credit score advices.

Also, the credit score also tracks the length of your credit history. When you shut older accounts, your credit history will look younger than it actually is. This, in effect, can hurt your score. Another good credit score advice is that you use old credit accounts because it makes your credit history look older. That would be a good sign for lenders. However, do so in caution. Always take into consideration some factors such as payment history when using or maintaining an old credit account.

Credit scores aren’t everything. It is not the only factor that lenders look at when creating decisions. Other factors, such as your income, assets, employment history and credit limits are also taken into consideration.

In particular, mortgage lenders might look at your total available credit. In turn, they might ask you to shut off a few credit accounts as a condition for getting a loan. However, when your goal is to actually improve your credit scores, it is common sense that you shouldn’t close accounts in advance when hearing such a request. The best way to go is to pay down your credit card debt. Doing that, in the long run, can actually improve your score.

Another determinant of your credit score is actually your past debts. An approximate of 35% of your credit score is mostly based on past debts that are more than 30 days late. 35% can really turn things around. A good credit score advice to follow is that if for some reason you are going to have a late payment, never let it slip past 30 days late. When you are safe within the 30-day limit, it can boost your potential of having a better credit score.

To summarize, you shouldn’t close any credit account on a whim, pay your debts, and finally when pay it within 30 days. Following these credit score advices can actually boost your score, and more importantly, being safe for any future transactions.

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