Does cancelling a CC improve a credit rating

glennyp

Hi all.

For the past few years, I have been on an IVA and came into some inheritance money in November and managed to partially pay off all debts owed.

During this time, I got a Capital One credit rebuilding CC with a high interest rate of 34%.

When my credit rating improved, I got an HSBC CC with a lower interest rate, however, this has effected my credit sore and put my back into the poor bracket.

If I was to cancel one or both of these cards, would it have a better or worse effect on my credit score ?

Thanks in advance.

fromtheshires

You dont have a credit score. The number they provide is an internal reference they use themselves to try and sell you stuff to 'improve your score' (red boost their profits).

Companies will only look at facts - Income to debt, defaults, IVA etc and then make their own decision on if you are a good customer to them.
A factor they will look at as well is available credit so if you have two cards, they may take into consideration the limit on both cards as available credit and decide its not suitable to lend you credit but dont worry about improving your made up score thinking it will make you more desirable for credit as it wont.

jde-tv

If you don't both cards then I would cancel the Capital 1 card. Regardless of score, It will look much better having the HSBC one.

takman

jde-tv wrote: »

If you don't both cards then I would cancel the Capital 1 card. Regardless of score, It will look much better having the HSBC one.

Lenders can see the credit card provider on your credit report so no credit card brand looks any better than any other!

SLZ

glennyp wrote: »

Hi all.

For the past few years, I have been on an IVA and came into some inheritance money in November and managed to partially pay off all debts owed.

During this time, I got a Capital One credit rebuilding CC with a high interest rate of 34%.

When my credit rating improved, I got an HSBC CC with a lower interest rate, however, this has effected my credit sore and put my back into the poor bracket.

If I was to cancel one or both of these cards, would it have a better or worse effect on my credit score ?

Thanks in advance.

It most likely changed according to Experian's rating system as you had a search carried out on your profile and likewise you took a new line of credit which impacts your profile.

Over time though it'll fix itself (6 months minimum before improvement) and you'll be back to average (hopefully). That said having settled accounts is always good but don't settle an account that you may need or is actually helping you rebuild credit.

jamesd

You can safely ignore jde-tv. Firms checking credit records do not see the brand of the card, just that it is a credit card. You see the full details when you check, though.

You would harm your credit scoring at both credit reference agencies and potential lenders by cancelling the cards. One of the factors in credit scoring is the age of the account, how long you've had it. Closing the oldest account can do significant harm and if you were to close both you'd go back to zero as your longest-running card account. Bad move. HSBC would be the least harmful one to close because it has the youngest age but don't close it.

It's no surprise that your credit scores will drop just after getting a new card or even just after applying. Just give it a few months and watch the trends as they show that you're handling it without trouble.

A substantial factor that just credit scores from credit reference agencies can't include is the effect of income and available credit compared to income. They can also fail to properly account for negative factors like bankruptcy, defaults and such, partly because there are strong differences in the type of customer that various lenders want or will accept.

Credit scores from credit reference agencies can be a useful indication of trends, correctly telling you now that the new card has temporarily reduced your likely ability to get credit.

For your next card, perhaps six months or a year form now, consider a card like those from Barclaycard that provide Experian credit scores once every two months and a pretty graph showing how it changes over time. That over time tracking and what you know you did can be useful.

For now just keep both cards. Two cards is useful for building up a better credit rating faster than one card. Eventually the benefit from more accounts of the same type drops of but for a few it's there.

Don't worry about having a low score for a while. You can have one without ever having failed to make a payment and with years of on time history - I'm currently in the low score range at Experian and have been for some months. No surprise, I almost doubled the amount of credit I was using a few months ago, used some cheap money transfer deals and applied for a new account, and was accepted. In spite of that Barclaycard just increased my limit on a card account I've had open since 2006 by £4k. Credit scores are a factor but so is a decade of spotless payment history and active use of the account.