Paying off credit cards - close account or keep open?

superbez

Hi

I have suddenly found myself in a position where I am able to clear all my debt and plan to spend the next year slowly building my already above average credit score. I have a loan which I'm going to pay off and two credit cards which I can clear the balances of. Is it better for my credit score to close the accounts completely or close one and keep one open etc? I hope to apply for a mortgage at the end of this year so trying to put myself in the best possible position.

Thanks.

BJV

I would close them for two reasons.

1. I would not be tempted to spend on them again.
2. It will show as paid and satisfied on your credit score.

p.s good luck with the house purchase

superbez

Ok cool. I thought I had heard it can be a good idea to keep a credit card, use it once a month (to buy fuel or something) and then pay it off at the end of the month. Is that a myth?

Candyapple

Your credit score is meaningless, it is just a marketing gimmick so ignore it. Your credit history is what matters.

It is a good idea to keep existing accounts open as it increases the average age of your accounts, but it is also a good idea to have some settled accounts to show that you have handled credit successfully in the past.

I would probably close one and keep the other one open and as you said do a small spend on it monthly and set the DD up to clear the full balance each month. That way you will keep getting those nice green zeroes every month.

Make sure you are on the electoral roll and check all 3 of your credit reports to make sure the info on all of them is correct and up to date.

solentsusie

I agree with Candyapple.

Keep one open at least, probably the one you have had the longest relationship with. Two credit card accounts are hardly excessive on the borrowing front.

One of the gripes you hear on here is that people cannot get good deals because they haven't had credit or there file is 'empty' so they have no proof that they can handle credit even if they have had it in the past. Lenders like to see that you have a history of behaving responsibily and can handle a loan/mortgage/credit card etc.

After six years even 'positive' factors disappear from your credit files, such as well run closed accounts, not just negative factors.

Goold luck with the mortgage application.

GingerBob_3

I would keep them both open and run a small transaction through each, once every six months or so. There's always a risk with just one CC that it could be declined or blocked or something. You should always have a fall-back.

PixelPound

You don't say what cards, but a consideration may be offers given to new customers vs existing ones. I closed my barclaycard after I got my mortgage, whilst it was my oldest card, offers for existing customers is pityful. So I know if I need a card with a long BT in future I can reapply.

Two cards isn't a lot and as has been said showing you are able to manage credit ongoing looks good, so no real need, as far as credit worthiness is concerned, to close one or both. Whether keeping them both open, closing one, or both will improve your "credit score" depends on many factors. However on a practicality issue a credit card could well be a good back-up for unexpected expenses during or after the house buying / moving process.

superbez

Well today is the day

I am going to pay off every single bit of debt I have. 2 credit cards, a loan, my overdraft, I'm going to close any payday loan accounts I have and pay back family members who have bailed me out over the years.

In response to nic_c the two credit cards are a Vanquis card (I'm really looking forward to calling them up I can assure you) which helped me build my credit score back in 2012 and a Barclaycard which I obtained in 2014. Obviously I'm looking at closing the Vanquis account as they are robbing bar stewards and I plan to keep the Barclaycard one open and as previously mentioned I will fill the petrol tank once a month and clear the balance at the end of the month using my debit card.

Once my credit score/history has caught up with all this, bearing in mind I'm hoping to be in a position to apply for a mortgage towards the end of the year, I'm assuming that applying for a second credit card at a more favourable rate BEFORE i apply for this mortgage would not be in my best interests. Is that correct?

Thanks for all the responses, the light at the end of the tunnel is finally shining brightly...

[Deleted User]

Is the Vanquis card your oldest card? If it is, give serious consideration to keeping it.

superbez

Deleted_User wrote: »

Is the Vanquis card your oldest card? If it is, give serious consideration to keeping it.

Yes it is and it has 3 times the limit that the Barclaycard has although I wanted to close that one for obvious reasons. Perhaps it would be better to keep it open with a zero balance for the time being? I hate that company so much...

[Deleted User]

Doesn't matter if you hate them or not. Use them to your benefit.

Keep it, and stick a transaction through every few months to keep it ticking over. No need to pay them anything.

An older, higher limit card - as well as having more than one - will improve the way lenders view you.