Will settling credit card accounts increase credit rating?

The_Boss

I've had a fairly high number of searches against my name, giving me a 'poor' credit rating with Experian. I'm obviously looking to improve this, and one of the ways I am looking at is closing some credit card accounts. I have two that I use for everyday/work reasons that will stay. I have another two that I use for 0% balance transfers (Halifax and Lloyds). The Lloyds one is coming to an end so I applied and was accepted for a NatWest one in late november. Will settling the Llloyds one counter the effect of the search for the NatWest? If it does have an effect, I'm considering settling the Halifax one early too (even though its only about 5 months old) and cancelling my second mobile phone contract account that I use but can live without.

:xmassign:

Zebra

Cancelling your unused cards should improve your credit rating.

See http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1098274211,85485,

However if your Halifax card is still within its 0% balance transfer period and has a balance on it then you may want to keep it until the end of the 0% period.

You could also try reducing the credit limit you have on the cards you use for purchases.

:xmassign:

The_Boss

Yeah, I know. Its a tough call, but I can just about clear all of the Lloyds and Halifax cards via my NatWest balance transfer and January salary. The 0% Halifax expires in June so we shall see.

Clariman

Hi TheBoss

Closing your credit cards will have a positive effect on your credit rating. You might be interested to know that I have just written a detailed credit scoring article for stoozers and rate-tarts. It can be found on the stoozing website. It was based on discussions with Experian and with a lending professional.

Clariman

The_Boss

Where abouts is this article? I looked on the Stooze board and there was a sticky thread, but no new write up.

Also, this was on Equifax : You have 8 active accounts and 7 settled accounts on file at your current address. Credit grantors prefer that you have at least one or two accounts as part of your credit profile. ACTIVE ACCOUNTS ARE PREFERRED TO SETTLED ACCOUNTS.

Or is that just their preference over Experian's?

Clariman

The_Boss wrote:

Where abouts is this article? I looked on the Stooze board and there was a sticky thread, but no new write up.

It was in a newsletter but it is on the site. The direct link is here http://www.stoozing.com/credscore.htm

Also, this was on Equifax : You have 8 active accounts and 7 settled accounts on file at your current address. Credit grantors prefer that you have at least one or two accounts as part of your credit profile. ACTIVE ACCOUNTS ARE PREFERRED TO SETTLED ACCOUNTS.

Or is that just their preference over Experian's?

I would interpret that as meaning that lenders prefer

(a)to see 2 or 3 accounts rather than 15 on your credit history
(b)to see that the 2 or 3 accounts you have are active rather than settled

Clariman

The_Boss

That is quality. Thanks.

One more quessie - how long after closing an account will it show up as settled? I cancelled a Capital One card in mid november, but as of the Experian update on december 18th, it was still showing as a balance of £0. Capital One wrote to me confirming the account would be closed ages ago and the online banking confirms that I am no longer a member.

Clariman

The_Boss wrote:

That is quality. Thanks.

One more quessie - how long after closing an account will it show up as settled? I cancelled a Capital One card in mid november, but as of the Experian update on december 18th, it was still showing as a balance of £0. Capital One wrote to me confirming the account would be closed ages ago and the online banking confirms that I am no longer a member.

The lenders report to the CRAs once per month, but a card closure does seem to take up to a couple of months sometimes.

Clariman

realaledrinker

Some, e.g. Co-op only seem to report every 2 months.

sly_dog_jonah

Clariman wrote:

It was in a newsletter but it is on the site. The direct link is here http://www.stoozing.com/credscore.htm

Clariman, that is a cracking article you've written there. Highly recommended reading.

I've been stoozing a couple of years now, but only pushing the boat out in the last 12months. I've only had one rejection when I recently slipped up and applied for a Mint while I had a Natwest 0% card active. Pretty sure I was denied because I they are from the same provider (I was busy at work and didn't take time to check this - lesson learned). But I'd also had some previously invisible credit stooze become visible when LloydsTSB started reporting my card to the CRA's. Balls.

Two stooze cards come to an end in Feb so I'll sit on my hands until then, try for renewed offers (M&S and Lloyds are both very good for these) and if needs be settle them before getting new stoozers.

My available credit is skewed significantly by my two egg cards (which wastes £8k when I'm outside of the anniversary deal on green) and a Nationwide for foreign purchases, which needs a high limit for business expenses. Egg green is kept high limit to maximise anniversary profits, and I keep the egg money limit high to ensure that muling is hassle-free for large SBTs during green anniversary (although I could lower it as I only use it for purchases most of the year, I fear it would make muling more suspicious).

Consequently for 7 months of the year my credit usage is approx 50% of my available credit, but that hasn't seemed to hinder my stoozing abilities. In terms of available credit against basic salary, I'm at 185% now but my actual take-home has been significantly larger this year and I have declared that as such when I've been applying for new cards and limit increases. My credit 'balances' are currently around 90% of basic salary. I have a perfect payment history so that gives a nice boost too I'm sure, but I've never paid a penny interest (except when taking advantage of 1.9% BT offer on egg).

Perhaps I should've posted this in the stoozing board or stoozing.com, but there we go it's done now. Hope that helps someone anyway.

Clariman

Thanks for your kind comments sly-dog-jonah.