How does it work?

[Tapped Out]

What is the name of your state? MA

I peruse these forums once in awhile, and find the advice to be pretty good (when I've had questions). Now, that being said, I have a question...

My husband and I have pretty good credit scores. We have had our accounts open for only a few years, as we just moved to the USA not that long ago. Now, I've heard that if you have too many accounts open, even without balances, it can adversely affect your credit score. We plan to renegotiate our mortgage in a couple of years, would it be better to close the accounts that we don't use? Will the closure of the accounts themselves (zero balances) negatively affect our credit? If it does, will it rebound stronger as we won't have access to the credit anymore? Do accounts that don't carry balances have any effect on a credit score? Can you understand what I am asking, or is it too convoluted to follow? I can try again, if I am not making any sense...

Thanks, in advance.

 

[seniorjudge]

Don't close any accounts.

Lots of lenders look down on that.

Why, I have no idea.

 

[VeronicaLodge]

yeah i dont get that either but i know it to be true. weird.

 

[efflandt]

Part of your credit score is percentage of your available credit limits being used. Even if your payments are never late, it looks better (more responsible) to creditors if you are using a small percentage of a higher credit limit, than if you have less credit, but are using a high percentage of it.

In other words, a bank will feel more comfortable giving you a loan if others have given you credit and you are using it wisely.

 

[Tapped Out]

Thank you for your advice. It seems a bit counterintuitive, but if that's the way it works, then that's the way it works! Thanks again.

 

[You Are Guilty]

In addition to the above, the overall length of your credit history is also taken into account (longer = better). So if you close your oldest (albeit, unused) accounts, your history is much shorter, leading to lower scores.

In short, keep 'em open until after you get the mortgage

 

[VeronicaLodge]

yeah but even if you close them, they are still on your report and someone looking would be able to see if you kept it in good standing or not. the current status of it would just be "closed by consumer" right?

 

[You Are Guilty]

yeah but even if you close them, they are still on your report and someone looking would be able to see if you kept it in good standing or not. the current status of it would just be "closed by consumer" right?

It should be, but your "average age of account" will likely be significantly lower (particularly for people with only a few years history to begin with). Closed accounts aren't counted when computing age.

 

[VeronicaLodge]

thanks!

 

[Jaun22]

I did not know that about closed accounts.

 

[Tapped Out]

Thanks, again, I really appreciate the advice. We've only been in MA since 2001, so we have a short history here to begin with (moved from Canada). We wouldn't want to do anything that would jeopardize our scores.

 

[boswd]

The only reason you should close any accounts are if they are costing you money in terms of annual fee's, montly fee's etc. If not, keep them open, put them in a sock drawer and forget about them.