Unless the idea of streamlined credit you have in your head is having 8 credit cards in a single wallet, then chances are good that you have considered canceling some of the cards you do not use much.
The truth about canceling credit cards:
Do unused credit cards hamper you credit score, or help it? Can removing old or outdated information make you look any better to bankers or lenders?
Closing your accounts will not undo damage that has been done. Once a card has been used, you cannot deny it exists. It becomes part of your permanent credit record and your credit report for at least the next 7 years. You could cancel the card the next day, the report info would remain. The same would go for any red marks that are associated with your accounts. Red marks are late payments, and charge offs, and overspending, etc. These things will fade with time, after 7 years they will fall off of you record. That said, you may not want some of those entries to disappear.
Why would you deny the good things? When you get rid of the old closed accounts that do not have any negative items, you are doing something silly. This is because you are benefiting from having a long, drawn out credit history, and those are accounts that are speaking to the credit history. The good entries are capable of remaining on your credit forever even though the bad ones fall off after a certain number of years. You really need to remember that as much as 15 percent of your credit score is directly dependent on how long you have been borrowing and repaying money.
Closing accounts may actually be capable of hurting your FICO score. Lenders are likely to take a long and hard look at your ratio between revolving credit account balances and the amount of total credit that you have. If you have accrued debt, then you are going to want to make sure that is kept to below 30 percent of the amount of available credit that you have - But the ideal amount of course is closer to 0%. You should definitely go ahead and make sure that those older lines of credit remain open, but make sure that you are not tempted or lured in by those lines of credit that you are not touching. When you end up closing out open accounts, then those credit lines will no longer be factored into your good credit ratio, and so you are going to be upping your debt ratio in a bad way. This is a silly thing to do and is going to end up costing you in the end.
Don't forget this concept - Because keeping the old, untouched lines of credit around can really help out your credit.
Photo Credits: The Consumerist
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1 comment so far ↓
If you really want to get rid of a credit card, you can just cut it up and throw it away. That way the credit line is still open but you can just forget it and not be tempted by using it.
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