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310 words.
Think
Twice Before Closing Old Accounts
By
Gerri Detweiler, consumer advocate and author of The Ultimate Credit
Handbook. www.ultimatecredit.com
When people
order their credit reports, they almost invariably find accounts on their
credit report that are listed as open when in fact they haven't used them
for a long time, and don't intend to use them again.
Revolving accounts such as credit cards are rarely closed unless you
specifically ask the lender to close them. You can call or write to
the lender (the contact information should be in your credit report)
and tell them you want to officially close the account and have it listed
on your report as closed at consumer's request. They must, by law, honor
your request.
But
before you close all your old inactive accounts, consider the
impact doing so may have on your credit worthiness. Sometimes
closing old accounts can actually hurt your credit rating because
it will shorten the average length of accounts on your credit file,
making it appear you have a shorter credit history than you actually
have. It may also decrease your available credit so if you carry balances
you may have a higher ratio of current balances to available credit,
which may be harmful. It can also affect a positive mix of credit references.
I
know you’ve heard that having too much available credit can hurt your
credit rating. That may be true of some individual lenders, but Fair,
Isaac Co., creator of the popular FICO scores, says they do not consider
the amount of available credit as a stand-alone factor. In fact, FICO
says that closing old or inactive accounts can never help your credit
but can only hurt it. If you do want to close out old accounts,
do so slowly and selectively. And make sure you leave some of the older
ones open for good measure.
Copyright
2003 by Gerri Detweiler, all rights reserved.
Gerri
Detweiler is considered one of the country’s top credit experts.
She is co-author of Stop Debt Collectors Cold, (www.stopdebtcollectorscold.com),
a valuable resource for understanding your rights when in debt. Gerri
has been interviewed in thousands of radio, television and print news
stories including USA Today, The Wall Street
Journal, The New York Times, Dateline
NBC and many others. She has testified before Congress several
times and worked on reform of the national credit reporting laws.
Contact Gerri at: gerri@ultimatecredit.com
to learn more.
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