Will closing recently paid-off cards lower my score?

missgstar26

Hi guys

I've been lucky enough to have been able to pay off all 4. Of my credit cards with help from my family.

Will closing the accounts harm my credit score?

The last couple of months were quite rough payment wise, and I already had some late payments.

Thanks in advance!

Tixy

What other accounts appear on your credit file?
How recent were any of the missed payments?

Are these all the existing credit lines you have?

It is not generally sensible to close down all your active credit lines, as then you are no longer keeping an active credit history.

[Deleted User]

Don't close them all as you're effectively putting an end to your credit footprint which will make getting future deals harder. Keep two cards open (the better ones - better = lower interest rate and a decent limit) and focus on operating them properly for a while to help repair any damage.

By operating them properly I mean using them each month and paying off the balance in full (preferably by direct debit). Don't carry a balance on the cards so don't spend more than you can afford to repay in full. Actually, carrying a balance won't harm your credit file but now that you're debt free you don't want to be paying interest when you don't have to.

Ktaylor86

Thanks for this thread...
I have done something similar recently paid off two credit cards and two overdrafts.

I thought having TOO much available credit was a bad thing (please correct me if i am wrong) so I've closed one credit card and kept the lower interest one which I will put some spending on a month and pay off in full in month.

I also lowered my credit limit from £3400 to £1000.

I still currently have two unused overdrafts at £1000 each.

Please can someone also advise if this was the right thing to do? I only did it couple of days ago.

(I will start in a new thread if deemed necessary but thought was the same kinda thing as OP post)

gb12345

Ktaylor86 wrote: »

Thanks for this thread...
I have done something similar recently paid off two credit cards and two overdrafts.

I thought having TOO much available credit was a bad thing (please correct me if i am wrong) so I've closed one credit card and kept the lower interest one which I will put some spending on a month and pay off in full in month.

I also lowered my credit limit from £3400 to £1000.

I still currently have two unused overdrafts at £1000 each.

Please can someone also advise if this was the right thing to do? I only did it couple of days ago.

(I will start in a new thread if deemed necessary but thought was the same kinda thing as OP post)

It is a balancing act - on the one hand too much available credit could affect your ability to get new credit and on the other, too high a utilisation of your available credit will worry lenders.

As you've now got zero balances on the cards and ODs then closing the other card will probably benefit you.

Had you paid off one card and had a fairly high balance on the other then you would have been going from say a 50% utilisation to a 80/90% and it may have caused more harm than good.

Ktaylor86

Thanks very much! :-)

Only credit I might be looking to apply for soon (if I can get ducks in a row) is a mortgage and I heard that it is good to have some available credit as mortgage lenders will view it as something to fall back on if you can't make payments (not that I intend that to happen!)

Again please correct me if I'm wrong :-)

sfax

There's not much point reducing limits and closing cards only to improve your potential score with lenders. It all depends on what you intend to do next.

If you are about to make an application then it may be worthwhile reducing a limit or closing a card so that the lender doesn't think that you already have enough available credit in relation to your income. I do this when switching BT deals but always try to keep my credit utilisation below 50% and preferably below 40%.

Closing cards and reducing limits can negatively affect your credit rating as it increases your utilisation and makes it looks like lenders were only prepared to extend you the reduced limit not the original limit.

It's not that important for mortgage applications providing you have some credit history and no (or only a couple) of late payments and no defaults etc. Your affordability is the biggest factor and the credit report is used mainly to check how much you owe and that you have a good record of paying money back