Posts Tagged ‘repair your credit’

Trying To Repair Your Credit? Do Not Close These Five Credit Cards

If you are trying to repair your credit, there are several things that you need to take into your careful consideration. For example, many people close most of their credit card accounts, but this strategy no longer works. In fact, if you do so, you are very much likely to hurt your FICO score. Therefore, if you are serious about improving your credit worthiness, you should never close the following five credit cards in particular.

The Card That Is Offering You The Best Terms

Does it really make any sense to let a good thing go? It doesn’t. So, if you have a credit card that charges you less, keep it. If you must close some accounts, consider closing those that are charging you more. If a credit card is providing you lost of attractive perks with no annual fee, no hidden charges, and at a very low interest rate, closing it will actually hurt your credit.

The Oldest Account

It is very important for you to keep in mind that your credit history plays a crucial role in determining your FICO score. A better credit history means a better score. Therefore, it is not at all a good strategy to close your old credit card accounts in an attempt to repair your credit. If you do cancel them, it will have a negative impact on your credit report. The simple reason behind this is that your credit history gets shortened when you close your old accounts. Your prospective lenders, landlords, utility service providers, and insurance policy providers will start treating you as a high-risk borrower because of your shorter credit history.

The Only Card That You Have

If you have only one credit card, you should never close it. Just keep off paying its bills in a timely manner. Always remember, your credit score also depends very much on how many different types of credit you are using. This way, having at least one credit card will actually help you improve your credit situation. It will keep adding additional points to your FICO score with time without requiring you to make any special effort in this regard.

An Account, Where You Still Have A Balance

While you are trying to repair your credit, make sure you do not close those credit card accounts where you still have a balance. When you close those cards, your total available credit becomes zero. It looks that you have zero credit limit on a card but you still have a balance on it, which actually gives an impression as if you have maxed out. It is important to note that thirty percent of your FICO score depends on the total amount of debt that you have. The more outstanding balance you have in your name, the lower your credit score will be. Remember, closing or cancelling an account does not eliminate the outstanding balances that you have on it. Having a credit card that appears to be maxed out will adversely affect your credit situation.

A Card With Available Credit

Credit utilization is another important factor that is taken into account when it comes to determining your credit score. Closing a credit card with available credit will increase your credit utilization, which is again not very healthy for your credit worthiness.

Overall, you will have to be very careful while you are preparing and implementing different strategies to repair your credit. “What you must do” is equally important as “what you must not do”.

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