Credit score fix – should I close a credit card after balance transfer?

[Brenda]

What’s best with respect to credit score fix – closing a credit card that I do not intend to use anymore or leave it open?

I have a Visa credit card that I’ve been using for the past 3 years. It’s in good standing – I’ve always made payments on time.

Since it’s going to expire 3 months from now I’ve made some rate shopping and found that I could get a better credit card (Discover) with )% APR for 12 months, so I’ve transferred my Visa’s entire credit balance to it. It now have a zero balance and I don’t intend to use it any more.

What should my next step be? Do I keep the Visa card open, or is it better to close it because I have no intention of using it?

Thank you!

[Danno]

Re: Credit score fix – Don’t close it!

The standard advice is to keep unused accounts with zero balance open. There are several reasons for this:

1. Closing the account immediately reduces your “available credit”, because you loose the credit limit of this card. Since your balance remains the same – your balance-to-limit ration (called credit utilization) goes up. Utilization is a KEY component of your credit score – if it goes above 35% it will lower your score.
2. Closing the account also makes your credit report “younger”. This also may lower your credit score.
3. Closed accounts in good standing remain 10 years on your credit report. This is a good thing. You don’t want to loose it.
4. Open but unused credit cards do not affect your credit score, so you have no reason to close them.
5. If you leave it open (i.e. on stby mode) it can be used for emergencies such as an accident, medical situation or even losing your job.

If you have a strong credit history, and therefore, good credit scores, closing an account won’t likely have a significant impact on your credit score anyway.

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