After paying off a credit card debt, can I close the account immediately or should I wait?
Credit Card
Coffee Quaffer asked:
I transferred a balance from one card to another with better terms, and now I’d like to close the first account. However, I’ve been told that if I pay off the balance and close the account immediately, it will look as if the company canceled and could hurt my credit score.
I transferred a balance from one card to another with better terms, and now I’d like to close the first account. However, I’ve been told that if I pay off the balance and close the account immediately, it will look as if the company canceled and could hurt my credit score.
How long should I wait before I cancel the old card?
Ella
July 30th, 2009 at 11:12 pm
Bertha
you can close it right away just call the credit card company and ask them to close the acct per your request/they may send you to retention to try and keep you just to let you know
July 31st, 2009 at 4:39 pm
Kevin
It won’t show up as closed by creditor. It’ll state closed by consumer.
August 1st, 2009 at 12:51 am
Gilbert
Don’t close the old card unless it has an annual fee!
Two reasons: A big part of building your credit is how much available credit you have vs how much of it you are using! This is a huge part of your credit score. There is a balance, you don’t want to have a HUGE amount of available credit, especially if you are going for a mortgage.
Second: If you are still newer to credit you need to keep your history. As you close credit cards, creditors will stop reporting them to the credit bureaus because it costs them money. Eventually you end up with a shorter credit file then you should have. Always keep your oldest card with no annual fee open, and use it at least once a year so the company doesn’t close it for inactivity.
August 4th, 2009 at 12:21 am
Doris
If the account you want to close is free (no annual fee) it is likely a good idea to keep the account open and to use it every once in a while. The reason is that one of the components of your credit score is what percent of your available credit lines (the maximum amount all your credit card companies will allow you to charge) you are carrying as a balance. The lower this percent the better.
For example let’s say your two credit cards allow you to charge up to $3,000 ($1,000 on credit card #1 and $2,000 on credit card #2). If you owe a total of $1,000, the percent you are using of your total credit lines is 33.3% ($1,000 / $3,000). If you close the the $1,000 credit card #1, this percent increases to 50% ($1,000 / $2,000). This increase in percent may lower your credit score.
Credit card companies not only want you to use and pay your credit cards on-time. They also want to know that you are not fully charging up all your credit cards.
August 7th, 2009 at 8:31 am
Roy
If you were carrying a balance, there may be one more payment due for interest from the last period.
If you have the will power to only use it for essential purchases that you will be able to pay in full when the bill comes, it can help your credit to leave it open, especially if it is your card with longest history. Part of your score is percentage of available credit you are using (wisely), and reducing available credit increases percentage being used, which can lower your score.
August 8th, 2009 at 10:29 pm
Wendy
Close it right away. If you have had problems managing credit cards you don’t want to have the temptation of having one sitting around calling your name!
August 9th, 2009 at 2:18 am
Kyle
You should probably wait two or three months. Most important thing is to cut the card for that account into about 100 pieces. Do not use that account. If you have the card you will use it and then you will have both accounts to pay on. With the new account be sure to make monthly payments on or before the due date. Make as much as payment as you can so you pay down the debt.
Too many open accounts, even if they do not have anything on them will hurt your credit score. Do not close them all at same time. Close one or two a month.
Credit score does not jump up fast. Over time it will improve. 6 months from now it should be better than today. A score of 700 or better is good.
August 10th, 2009 at 4:31 am
Mary
The bank has to tell them who closes the account. If you call up and close it, then they are obligated to say “closed at consumer request”. Though you may want to put your request in writing just to make sure its done properly.