Credit Repair 30
Your Resource For Better Credit

How To Close Credit Accounts Wisely For Credit Repair

by | Mar 2, 2024 | News

When it comes to credit repair, deciding whether to close credit accounts can be tricky. While it might seem like a good idea to shut down some accounts to avoid overspending or simplify your financial situation, it could actually hurt your credit score. Here are some tips on how to close credit accounts wisely for credit repair:

1. Check Your Credit Report: Before you make any decisions about closing accounts, make sure to get copies of your credit reports from the major bureaus: Equifax, Experian and TransUnion. Take a look at all your accounts and jot down the ones you’re thinking of closing.

2. Understand the Impact: Closing a credit account can impact your credit score in various ways. It may reduce your available credit, potentially increasing your credit utilization ratio (the amount of credit you’re using compared to what’s available), which could lower your score. Also, closing older accounts might shorten your overall credit history, another factor that affects your score.

3. Prioritize Your Accounts: If you’re thinking about closing multiple accounts, prioritize them based on factors like interest rates, annual fees and how long you’ve had the account. Consider maintaining accounts with a lengthy history of on-time payments, especially if they don’t charge an annual fee.

4. Settle Outstanding Balances: Before shutting down an account, make sure to clear any remaining balances to steer clear of extra fees or adverse effects on your credit rating. If you can’t pay off the full balance at once, think about transferring it to another account with a lower interest rate.

5. Explore Other Options: Instead of closing the account, explore alternatives like requesting the issuer to waive the annual fee. This way, you can keep the account open while minimizing your expenses.

6. Keep an Eye on Your Credit Score: Once you’ve closed an account, make it a habit to regularly check your credit score to evaluate any changes. Remember that it might take some time for these changes to be reflected in your credit report.

7. Plan Strategically: If you’re gearing up for a significant loan application, such as a mortgage, in the near future, refrain from closing any accounts in the months leading up to it. Lenders generally prefer seeing a longer credit history and a lower credit utilization ratio.

8. Exercise Caution When Dealing with Store Cards: It might be alluring to shut down store credit cards, particularly if you don’t use them often. However, it’s crucial to think about how this could affect your credit score first. Closing such accounts might lower your available credit and potentially raise your credit utilization ratio.

In essence, although closing credit accounts for credit repair can be a part of a plan to enhance your financial well-being, it’s essential to do it thoughtfully in order to minimize any adverse impact on your credit score. Reflect on the potential repercussions and explore other options before reaching a decision, while also keeping an eye on your credit score regularly to monitor any changes.