Credit question

[Holly_Hobby]

f I pay off a credit card and no longer need it, should I close the account or leave open at a zero balance? In other words, will closing the account erase the history of the credit card on my credit report? Thanks so much!

[Old Codger]

1. best

Best to keep the account open unless it has a high annual fee that you don't want to pay. Keeping the account open has an effect on amount of credit available to you and with zero balance it keeps your "percent of credit used" compared to that available at a good balance therefor is a plus on your credit score...If you do not want to use that card anymore just cut it up and throw it away but leave account open.

[DadOf2LittleAngels]

2. I was always told its best

to set up one or two reoccurring bills on the card ( for example your phone bill ) and pay it off every month. A card with monthly activity and a zero balance is good for your credit

[AP]

3. Five or ten years ago, advice was to close it because, if you had too much

available credit without the means to pay it down if you maxed out, you were a credit risk.

Recently, banks say keep it open so you don't erase the history.

I think that new advice is bullshit driven by banks' fears that if they reported in their annual reports that people were closing their accounts, their stock prices would fall.

[Deja Q]

4. Leave it open, especially if it's an older card!!!

They go by how much you spend, how much is paid back, your current amount of credit available, how long the card has been open.

It's actually better to have 5 cards with $1000 on each than one card with $5000 on it.

Not that having a balance is a good thing...

Always pay off and use from time to time so they don't cancel you claiming you never use it (that'll hit you even more than asking them to close the account).

The history will still be there, of course. But open accounts are the ones looked at to show if you're good with paying money back.

[splat]

5. Available credit helps

I've tended to have only a few credit cards, some unused equity lines and a mortgage. Recently I learned that my score was docked for not having enough available credit, since the mortgage balance was "too high" a percentage of it in use.

I was advised to open another credit card just to extend the amount of credit available to me. So your unused balance is actually important.

[AP]

7. This was not true five or ten years ago. People were a credit risk if they had too much room

to go into debt.

Not only were people told that, it makes sense. The more trouble you can get into, the bigger a risk you are.

I really think the idea that more credit helps your ratings is a misimpression banks intentionally spread so that they can report higher numbers of customers to Wall Street, and, possibly, so that credit ratings will be lower so that they can charge people higher interest rates on their debt.

[AP]

6. No credit card company is going to close your card because you're not using it.

Reporting fewer potential customers to Wall Street would cause their stock price to go down, and they're not going to do that.

Also, I don't believe that credit rating agencies don't look at your historical rating (which would mean that at any prior moment, they were looking at what accounts you had at that time, even if you've closed them later) when they calculate their score.

I think they intentionally try to give the impression that they only look at the snapshot (excluding closed cards) because they don't want people to start closing accounts, which could drive their stock prices down.