Many people will close credit card accounts in an attempt to rid themselves of temptation. Some people may even believe that closing credit card accounts will improve their credit score. I made this mistake. In fact, closing credit card accounts seemed logical to me at the time. I thought, “Ok, I have a bunch of credit cards, I have paid them off, and I don’t want to be tempted to use them again so I better close these accounts.” I also said to myself, “Hey, this will improve my credit score too! The magic FICO credit score generator will see that I am acting responsible by closing credit card accounts after I paid them off!” This couldn’t have been farther from the truth. Three months after I closed 3 out of 4 of my credit cards, my credit score dropped about 100 points.
Remember: your credit score is largely based on how well you manage open credit accounts. If the account is closed, there is nothing to go off of except the account history (which is probably bad if you closed the account). An excellent credit score reflects that the individual has had long term, well-managed credit accounts. Also, while it is true that too many open credit card (revolving) accounts can hurt your credit score, the key is to shy away from opening too many accounts, not closing the accounts. Never close an open credit card account –it will hurt your credit score.
What if I can’t control my spending?
Easy: throw the card in the garbage (cut it up first) and forget that it ever existed. Therefore the account is still technically open and is reported on your credit report –you just don’t have access to it. The key to building great credit more than anything is time.
Open 2 or 3 credit card accounts and keep them open for at least 7 years. If you have bad credit and can’t get a normal credit card, get a secured credit card from Credit.com.
Attempt to reopen charge off accounts
Another technique you can try if you have already closed a credit card account is to contact the creditor and ask if they will consider reopening the account. You can be certain that they will recheck your credit report, so this usually only works if you have showed some improvement. You can also attempt to send them a small down payment to show that you will honor your agreements. This will only work with small creditors –Citibank, Capital One, Chase are too big to take notice.
Here is how I got Capital One to reopen my account after I paid off the balance and closed the account: First I got two other credit cards (one secured and one gas card). I kept up on the payments for one year. After the one year was up, I called their customer support and asked if they would “kindly consider reopening my account based on the recent steps I have taken to improve my credit score and the accounts I have in good standing as of right now.” They checked my credit report and a few weeks later I received a new Capital One credit card with a $500 limit.
Take home points:
- Never close credit card accounts that are in good standing.
- Avoid bad credit by not opening too many credit card accounts. (2 or 3 credit cards is plenty)
- If you can’t control your spending it’s better to throw away the credit card than to close the account.
- Attempt to reopen closed credit card accounts by contacting the creditor after you have proved that you can be trusted.
{ 7 comments… read them below or add one }
What if I have 6 credit cards all in good standing? Is that too many?
I’d say 6 is too many. Consider paying off the balances on 2 of them, but keep them open.. don’t use them.
Absolutely true. I recently paid off and closed one of my Citibank retail revolving accounts (I have a couple) under the notion that it will keep me from charging and will improve my score as I falsely was informed. Two months after, my credit score plunged tens of points. It hurt badly. I just found this article by Ryan, wonderful article. I fully agree, no matter how many accounts you have, keep them open, and destroy the card. The creditors may close them and this action will not harm your credit score whatsoever. One of my accounts was closed by the creditor because I never used it and it never harmed my score. The Citibank account I closed is in my report as a single negative. I will take Ryan advice and try to reopen it. Don’t know what they will say after the plunge of my credit score.
I refinanced my Mortgage and the bank sent letters to my credit cards closing the accounts. Now I am concerned that I have a bad rating because of it. (All the credit cards were in good standing)
same thing happened to me,i unfortely listened to an email newsletter sugestion and wow what a mistake it was to do this.i had like 13 cards and all was in good standing well i thought of well all accounts are in good standing and paid off so i closed them 1 by one,see the news letter phrased it this way.if you have alot of cards or even cards that are redit was near currently open,then that credit limit will hurt your score,exapmly 1500 credit limit will hurt youe score too much credit,well what a load of hog wash..my accounts i had were over 5 years old never been late and my credit was awesome well long story short i closed them all out and now my score went down to 500 some thing,so who ever says to close open accounts is stupid,and does not know the credit card industry.better off me just shredding the card and waiting 2-3 years when new card comes in the mail,or heres another sugestion use your card once in awhile ,like online purchase.remember as long as you have credit card number and code number on back of card and expiration date then you can use it online, at least that way the account does not get closed but stays open until you get your new cards in the mail and keeps you from using it reguarly.
To Ann
just cause you refinance your home does not mean that all credit cards get closed out unless you wanted them closed out ? and if so then the bank hgas every right to do that.but what i dont understand is how can they close out all your credit card accounts? is this what you wanted ? because of refinancing,you consolidated all your debts? your info is a little vagu.put more info of what happened and maybe there be some one out there that can assist you better..
When we refinanced, the person at the bank stated that they would pay off the credit card balances and close the accounts. It wasn’t a question…it was a statement. I didn’t question it because she made it sound like it was a condition of the refinancing. She had the cheques ready to the creditors and along with it were letters to close the various accounts and I had to sign them. The bank then sent the signed letters along with the cheques.