Close paid off credit cards after consolidation?

joeywthz

Hey

I have been accepted for a consolidation loan at a lower interest rate than my credit cards.

Over the next few days I plan to pay off my credit cards in full.

My current debt is 8k and will be payed off via the loan in 24 months. My credit rating is "fair".

While I want to be debt free, I also want to improve my credit rating.

Once paid off, the cards will be cut up. However, from a rating point of view, is it better to keep the accounts open so it shows I am using only 50% of my available credit rather than 100%?

Thanks

Joey

Tixy

There is no simple answer to which is better.

When you say from a rating point of view I assume you mean from a future lender's potential point of view.

In terms of the percentage of credit being used its only 1 small factor of all the issues a potential lender would consider. And they'll likely distinguish between fixed term repayment and rolling credit agreements. If the only open credit you have is a loan then the percentage of available credit used is a meaningless figure.

marty2be2000

Remember that once the cards are paid off, there will still be one more statement after the one you pay in full that will have trailing interest covering the dates between the statement date and the date the full payment reaches your account.

If it were me then I would close the cards once the balances are confirmed zero and you have a set of statements with a confirmed zero balance.

Closing them has the advantage that it removes the temptation to spend on them again and then you finding yourself in a worse situation.