What should I do after paying off my credit cards

KianGreen03

Hi all,

I’ve got about 3 seperate credit cards, I decided to pay them off and put them onto a loan as it will allow me to pay them off faster.

Now that they are all payed off do you recommend that I close them or should I keep one or all of them open?

Emmia

You've not paid off your debts, you've just moved them from cards to a loan.

In your situation I would close all your credit cards and not apply for any new ones until the loan is also paid off.

Nasqueron

There is some benefit to having a card for daily spending, paid (not payed, which is a nautical term!) off in full every month by direct debit. However, as Emmia says, you ran up a load of debt, borrowed more to pay the debt, you have a real risk of running up debt again - I am surprised the bank lent the money for consolidation - so closing the cards isn't a bad idea to avoid temptation. Maybe reduce the limit to maybe £250 or £500 and keep one so you can't overspend but can maintain credit history.

KianGreen03

Emmia said:

You've not paid off your debts, you've just moved them from cards to a loan.

In your situation I would close all your credit cards and not apply for any new ones until the loan is also paid off.

Ahh okay, I just wasn’t sure as to whether I should leave them open as it could affect my credit score by closing them. 

I was planning to leave one open at least just for spendings such as fuel which I can pay off at the end of the month

KianGreen03

Nasqueron said:

There is some benefit to having a card for daily spending, paid (not payed, which is a nautical term!) off in full every month by direct debit. However, as Emmia says, you ran up a load of debt, borrowed more to pay the debt, you have a real risk of running up debt again - I am surprised the bank lent the money for consolidation - so closing the cards isn't a bad idea to avoid temptation. Maybe reduce the limit to maybe £250 or £500 and keep one so you can't overspend but can maintain credit history.

Yeah I see where you guys are coming from, the only reason I decided to apply for a loan is because it allowed me to pay off the full debt a lot sooner compared to if I had left it on my credit cards.

So would it be a wise idea to leave them all open but just use them for daily expenses such as fuel and pay them off in full at the end of the month? 

I only ask as I’m not sure how it would affect my credit score if I close them.

CliveOfIndia

KianGreen03 said:

So would it be a wise idea to leave them all open but just use them for daily expenses such as fuel and pay them off in full at the end of the month? 

As far as it goes, yes.  Doing this will start to build up a positive credit history, which is what's important.

But ........ Make sure you always repay in full, every month, without fail.  Set up a Direct Debit for the full statement balance.  And only use the cards for essential purchases which you know you will be able to, without any question, repay in full when the statement arrives.  The moment you start to leave a balance on there, you're back on the slippery slope to debt.

KianGreen03 said:

I only ask as I’m not sure how it would affect my credit score if I close them.

Your score (at least, the score you can see on your CRA reports) is utterly meaningless, so ignore it.  It's not used - nor even seen - by any lender.

If you can absolutely trust yourself not to overspend then keeping the cards open, using them for everyday purchases, and always repaying in full every month, will benefit your credit history.

Aside from that, in terms of improving your credit status, get that loan paid off as soon as possible.  Make as many overpayments as you can, unless there's a penalty for doing so.  Reducing your total outstanding debt will improve your credit status, all other things being equal.

Nasqueron

KianGreen03 said:

Nasqueron said:

There is some benefit to having a card for daily spending, paid (not payed, which is a nautical term!) off in full every month by direct debit. However, as Emmia says, you ran up a load of debt, borrowed more to pay the debt, you have a real risk of running up debt again - I am surprised the bank lent the money for consolidation - so closing the cards isn't a bad idea to avoid temptation. Maybe reduce the limit to maybe £250 or £500 and keep one so you can't overspend but can maintain credit history.

Yeah I see where you guys are coming from, the only reason I decided to apply for a loan is because it allowed me to pay off the full debt a lot sooner compared to if I had left it on my credit cards.

So would it be a wise idea to leave them all open but just use them for daily expenses such as fuel and pay them off in full at the end of the month? 

I only ask as I’m not sure how it would affect my credit score if I close them.

I'd suggest only one if you don't feel you can keep the spending under control, at the least until your debt is repaid, then maybe look at another

KianGreen03

Nasqueron said:

KianGreen03 said:

Nasqueron said:

There is some benefit to having a card for daily spending, paid (not payed, which is a nautical term!) off in full every month by direct debit. However, as Emmia says, you ran up a load of debt, borrowed more to pay the debt, you have a real risk of running up debt again - I am surprised the bank lent the money for consolidation - so closing the cards isn't a bad idea to avoid temptation. Maybe reduce the limit to maybe £250 or £500 and keep one so you can't overspend but can maintain credit history.

Yeah I see where you guys are coming from, the only reason I decided to apply for a loan is because it allowed me to pay off the full debt a lot sooner compared to if I had left it on my credit cards.

So would it be a wise idea to leave them all open but just use them for daily expenses such as fuel and pay them off in full at the end of the month? 

I only ask as I’m not sure how it would affect my credit score if I close them.

I'd suggest only one if you don't feel you can keep the spending under control, at the least until your debt is repaid, then maybe look at another

Yeah I might just keep one as the other two cards won’t be used in all honesty. But by closing the other two, will it affect my credit score at all?

CliveOfIndia

KianGreen03 said:

 But by closing the other two, will it affect my credit score at all?

Yes, your score will almost certainly drop - it drops in response to any change in your credit circumstances, whether good, bad or indifferent.

But I said in my previous reply, the CRA score is nothing more than a meaningless marketing gimmick, so it doesn't matter one jot if it drops.