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Older Debt and Credit Cards You Don't Use
It is easy today to apply for a store credit card that you forget several years down the road -
as it is open.
Having credit lines and credit cards you don’t need makes you seem like a worse credit risk
because you run the risk of “overextending” your credit, in general.
Also, having lots of accounts you don’t use increases the odds that you will forget about an
old account and stop making payments on it - resulting in a lowered credit score.
Keep only your accounts you use consistently and make sure that all other accounts are
closed. Having fewer accounts will make it easier for you to keep track of your debts and will
increase the chances of you having a good credit score.
However, please realize that when you close an account, the record of the closed account
remains on your credit report and can affect your credit score for a while (several months). In
fact, closing unused credit accounts may actually cause your credit score to drop in the short
term, as you will have higher credit balances spread out over a smaller overall credit account
base.
For example, if your unused accounts amounted to $2000 and you owe $1000 on accounts
that you have now (let’s say on two credit cards that total $2000) you have gone from using
one fourth of your credit ($1000 owed on a possible $4000 you could have borrowed) to
using one half of your credit (you owe $1000 from a possible $2000). This will actually cause
your credit risk rating to drop. In the long term, though, not having extra temptation to charge
and not having credit you don’t need can work for you. Be cautious.
as it is open.
Having credit lines and credit cards you don’t need makes you seem like a worse credit risk
because you run the risk of “overextending” your credit, in general.
Also, having lots of accounts you don’t use increases the odds that you will forget about an
old account and stop making payments on it - resulting in a lowered credit score.
Keep only your accounts you use consistently and make sure that all other accounts are
closed. Having fewer accounts will make it easier for you to keep track of your debts and will
increase the chances of you having a good credit score.
However, please realize that when you close an account, the record of the closed account
remains on your credit report and can affect your credit score for a while (several months). In
fact, closing unused credit accounts may actually cause your credit score to drop in the short
term, as you will have higher credit balances spread out over a smaller overall credit account
base.
For example, if your unused accounts amounted to $2000 and you owe $1000 on accounts
that you have now (let’s say on two credit cards that total $2000) you have gone from using
one fourth of your credit ($1000 owed on a possible $4000 you could have borrowed) to
using one half of your credit (you owe $1000 from a possible $2000). This will actually cause
your credit risk rating to drop. In the long term, though, not having extra temptation to charge
and not having credit you don’t need can work for you. Be cautious.