To close, or not to close? (No-interest credit card accounts).

[Amethyst]

In the past 2 years, we have had to replace many appliances in our home, and husband had all his dental work rebuilt/replaced (some of it was 40 years old, and gold ... they don't build bridges like they used to, but at least he doesn't look like Leo the Pimp when he smiles anymore ).

We were offered many "no - interest - for 12 -24 months" deals, and ended up opening 5 such accounts. I made monthly payments on all of them, and they are all paid off now, except the one for the dental work, which has a year left.

My question: Is it worse for one's credit rating to leave these accounts open, or close them? I have read that just having these accounts at all, even though we paid them on time, could damage our rating. I have also read that closing accounts after just a year or 2, even if you don't need or want them any more, can damage your rating.

Credit ratings seem arcane; nobody seems to know how they are calculated. (Given the importance that one's credit rating can assume at times, I wonder why the public puts up with this *****-pocus, but that's for the political thread).

 

[ziggy29]

In general, closing them would be more likely to lower your score. Having said that, whether it does -- and how much -- depends largely on how large the credit lines are and how long the account has been open. The higher the credit line, the more closing it will hurt your "utilization ratio" (i.e. you'd be using a higher percentage of available credit). Also, the older the account, the more closing it would hurt (the "average age" of open revolving credit accounts would drop).

Now it could be that in your case these would be minor hits; there's really no big deal (for example) if a FICO score goes from 790 to 780 -- that wouldn't likely turn an approval into a rejection or increase the interest rate. But in some cases, if you have "borderline" excellent credit (say 740-750), a 10-20 point drop could prevent you from getting the best terms in a few cases .

 

[KB]

If you haven't checked your credit report lately, that might give you the answer (annualcreditreport.com). My credit report score was downgraded a few years ago because I had too much available credit. That was based on the indicators on my credit report.

I closed a couple of the zero interest accounts that I had paid off, and over the next year watched my score increase.

I think I'd use the credit report as an indicator, because everyone has a different amount of available credit vs credit used. The credit ratings use a ratio in their score determination.

 

[ziggy29]

If you haven't checked your credit report lately, that might give you the answer (annualcreditreport.com). My credit report score was downgraded a few years ago because I had too much available credit. That was based on the indicators on my credit report.

I'd be interested to see that blurb on a credit report. To my knowledge, a traditional credit report doesn't have a negative called "too much available credit." The higher the percentage of your available credit, the better for the credit score. That's pretty much what I've always seen. And if you have the same amount of USED credit in either case, having more available credit means a lower utilization ratio -- a positive.

If I understand the scoring system, I don't think *closing* an account can improve your credit score. It may not have a negative impact depending on other factors, but I don't think closing an account can improve any of the factors that go into the credit score.

[Edit to add: I did some poking around and it looks like any report that uses the "Vantage" score could ding you a small amount for having too much available credit. There appears to be no such thing as "too much available credit" on a FICO score.]

 

[haha]

In the past 2 years, we have had to replace many appliances in our home, and husband had all his dental work rebuilt/replaced (some of it was 40 years old, and gold ... they don't build bridges like they used to, but at least he doesn't look like Leo the Pimp when he smiles anymore ).

So that is what I look like! I don't have any bridgework, but I love my gold crowns. I told my dentist, if I ever get one right in front that he should try to talk me out of gold with a diamond inlay. But he loves craftsmanship so he'll probably be promoting it!

Ha

 

[Amethyst]

So that is what I look like! I don't have any bridgework, but I love my gold crowns. I told my dentist, if I ever get one right in front that he should try to talk me out of gold with a diamond inlay. But he loves craftsmanship so he'll probably be promoting it!

Ha

You mean you want to look like Leo *on purpose*?

My husband's gold crowns in front *had* been covered by white porcelain, which had cracked off, exposing the gold underneath. Not at all a pretty sight! Now, he resembles a high school kid (well, OK, a rather mature one) whose braces just came off

 

[haha]

You mean you want to look like Leo *on purpose*?

Fond memories of my old neighborhood.

Both you and your husband are probably pleased by his more upscale appearance.

Ha