How do closed accounts affect your creditworthiness?

Alex9384

I've read that if you close a credit card with a good long history, you'll "lose" this history. But isn't it still visible for several years on your credit file among closed accounts?

So how much weight do closed accounts really have? I guess it also depends on when the account was closed, whether it was a month ago or 3 years ago.

As many people on this forum say, credit scores (yeah I know they are just made up numbers) generally don't like any changes. Now, does the same apply for lenders when assessing your creditworthiness? Don't they like any recent changes, e.g. recently closed account?  If you have already too much credit available to you, it may result in being offered less credit by a new lender. On the other hand, if you close your account with a long history in order to reduce the amount of credit available to you, it may be seen as something negative by the new lender? Another option is just to ask your old lender to reduce your credit limit but this may also look like your lender doesn't trust you too much any more. How exactly this works? What's the best option?

[Deleted User]

There's no best option.

It depends on the accounts you have, the accounts you need and your future aspirations.

However, it's a constant not to reduce your limits. Either keep them or close them.

Alex9384

Deleted_User said:

There's no best option.
It depends on the accounts you have, the accounts you need and your future aspirations.
However, it's a constant not to reduce your limits. Either keep them or close them.

Not to reduce limits because it looks on my credit files as if my current lender didn't trust me anymore? Or some other reason?

I have a credit card with Halifax and they are now offering me a second credit card with nearly the same credit limit. I'm thinking about buying a car on a 0% purchase CC. The credit limit on my current card would not be sufficient for the car I want, but Halifax say I can shift a portion of unused credit limit from my current credit card to the new card. So I would have a new credit card account with relatively high credit limit and at the same time another credit card having its limit reduced. From what I've learnt on this forum, other lenders can't see that these two cards are from the same bank so basically they wouldn't be able to know what happened. If you're saying it's better to close an account than reduce its limit, I just wonder if it would be possible to shift a portion of the old credit limit to the new card and then close the old card right away or just a couple days later so it actually doesn't show the limit reduction on my credit files?

SpreadableToast

Alex9384 said:

Deleted_User said:

There's no best option.
It depends on the accounts you have, the accounts you need and your future aspirations.
However, it's a constant not to reduce your limits. Either keep them or close them.

Not to reduce limits because it looks on my credit files as if my current lender didn't trust me anymore? Or some other reason?

I have a credit card with Halifax and they are now offering me a second credit card with nearly the same credit limit. I'm thinking about buying a car on a 0% purchase CC. The credit limit on my current card would not be sufficient for the car I want, but Halifax say I can shift a portion of unused credit limit from my current credit card to the new card. So I would have a new credit card account with relatively high credit limit and at the same time another credit card having its limit reduced. From what I've learnt on this forum, other lenders can't see that these two cards are from the same bank so basically they wouldn't be able to know what happened. If you're saying it's better to close an account than reduce its limit, I just wonder if it would be possible to shift a portion of the old credit limit to the new card and then close the old card right away or just a couple days later so it actually doesn't show the limit reduction on my credit files?

The limit reduction would be applied immediately (to stop you racking up debt on the old card) and this would be reported to the CRAs, along with the closed status.

Alex9384

I already have 3 other credit cards. The oldest one has the lowest credit limit (1800) and I'm not sure if I should get rid of it or not.  It has no perks whatsoever and the only reason I still keep it is because it's my oldest credit card (plus, having another direct debit which is useful) with flawless history.
If I decide to close it, does it immediatelly have zero impact on future lending decisions or is it still visible and taken into account when assessing my creditworthiness?

SpreadableToast

Alex9384 said:

I already have 3 other credit cards. The oldest one has the lowest credit limit (1800) and I'm not sure if I should get rid of it or not.  It has no perks whatsoever and the only reason I still keep it is because it's my oldest credit card (plus, having another direct debit which is useful) with flawless history.
If I decide to close it, does it immediatelly have zero impact on future lending decisions or is it still visible and taken into account when assessing my creditworthiness?

They're going to take it into account, just as they will for accounts that are closed but that have been run poorly.  Obviously the longer it has been since the card was closed, the less weight is put on this good history.

Alex9384

SpreadableToast said:

They're going to take it into account, just as they will for accounts that are closed but that have been run poorly.  Obviously the longer it has been since the card was closed, the less weight is put on this good history.

Thanks. That's what I wanted to know. Some websites say that if you close your old account "you will lose your history". Obviously, you won't lose it immediatelly but rather gradually as it will have less and less impact over time.

Sea_Shell

Have you checked that the garage will let you use a CC for the purchase?

Our last 2 cars, they only allowed a maximum of £500 to be paid using CC

Alex9384

Sea_Shell said:

Have you checked that the garage will let you use a CC for the purchase?
Our last 2 cars, they only allowed a maximum of £500 to be paid using CC

Not yet. I don't know which garage will it be. I just know what car I want and what price range it is.

What is their problem with using a credit card? What is the typical percentage they have to pay for a transaction? It's not Amex of course, so I assume for MC/Visa credit it's around 1.5%?
I know they are not allowed to charge more for using a CC but they can still give me less discount than they would normally do. Most people haggle on price before buying a car, so instead of giving a 400 pounds discount, they can give 300 pounds. Is there any other problem when paying with a CC?

Malkytheheed

Arnold Clark accepted full payment for our last card on CC. 5 figures. 

Sea_Shell

I guess everything is open to negotiation.    Maybe in hindsight we didn't pay more by Credit Card, because we weren't prepared to pay the fee as part of the purchase price (and we had the cash to pay by Debit Card)