 |
     |
|||
 |
 |
 |
 |
|
  |
||
 |
 |
 |
Many of our forms or applications are pdf files and require adobe acrobat reader to view. Click the button above if you need a free download of acrobat reader.
|
If your favorite restaurant dismissed its longtime chef, hired bad waiters, and raised its prices, you would probably stop eating there. That's the beauty of the free-market system: dissatisfied customers can just stop eating there. But many consumers who have been treated badly by their credit card companies feel they don't have that option. That's because closing a credit card account, while emotionally satisfying, could hurt your credit score. That, in turn, could raise the cost of getting a mortgage, car loan, or even a new credit card. In the past, the most effective way around this problem was to pay off the balance and stop using the card. As long as the account remained open, your credit score would remain unscathed. But increasingly, that strategy carries a cost. In response to credit card reforms that took effect February 22, 2010, many credit card companies are looking for new ways to raise revenue, including adding annual fees to their cards. It sounds like a scene from a bad movie: pay the fee or your credit score goes bad. But the impact of closing an account varies, depending on your credit profile, says John Ulzheimer, president of consumer education for: www.credit.com. Some consumers can close an account without hurting their credit score at all, he says. He goes on to say, others could see their scores decline by a few points, but not enough to make a difference. Below are some things to consider before you close out your credit card account. Your Total Available Credit Opening accounts to increase available credit is a bad idea, says Craig Watts, spokesman for Fair Isaac, which developed the widely used FICO score. "Any time you open a new account, your credit score is likely to drop a few points, because statistically, you're riskier." If, however, you already have several credit cards with large credit lines and pay off your balances every month, closing one account may not affect your score, Ulzheimer says. To determine how closing a card will affect your utilization ratio, get out a calculator and copies of all your open-end loan statements (credit cards and home equity lines of credit). Add-up how much available credit you have and how much you're using. Then subtract the available credit from the account you'd like to close. Ideally, you should have a credit utilization rate of 30% or lower. Your Credit Score Start by reviewing your credit report. You are able to do this for free once a year from each of the three major credit bureaus by visiting: www.annualcreditreport.com – the only accredited site supported by all three credit bureaus. As you are reviewing your report, you may be offered the ability to purchase your credit score or you can purchase your score from each of the three credit bureaus’ websites: Experian, Equifax, and TransUnion. Click here for contact information for each bureau. Your Borrowing Plans But suppose you're thinking of refinancing your mortgage within the next few months or plan to buy a new car. The wisest course of action is to avoid closing any credit card accounts until you've been approved for your loan, Watts says. In the wake of the credit crisis, lenders are paying more attention to credit scores than ever. Ideally, you want a score in the high 700s, or low 800s, to get the best deals, he says. Many consumers fear that closing a credit card account will hurt their credit history, which accounts for 15% of the FICO score. But when you close an account, it doesn't disappear from your credit record. The credit bureaus will keep a record of your history with that account for about a decade after it's closed, Watts says. For more details about what makes up your credit score, please click here. You’ll also find information on what it means to have a low credit score and how to improve your score. Sources:
|
||
 | ||
- Your Credit Score |
||
 |
 |
 |
