Consumption and Real Estate
Should I close my line of credit account?
Question : Should I close my line of credit account?
I have a line of credit account that I have since transferred to a lower rate credit card. The line of credit has an obscenely high apr and I never plan on using it again. I do not want to negatively effect my credit score… Should I close this account? Or keep it open?
Just to be clear, it’s not a credit card. It’s a line of credit. I have no physical card to cut up. It’s simply a paid off loan.
line of credit rates
Best answer:
Answer by Chrys
keep it open to keep your score up…no one says you have to use it.
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#2 written by Uncle Pennybags 1 year ago
Perversely, closing it would hurt your credit score.
A key factor of your credit score is your ratio of credit balance vs. credit available. You want to keep that as a low figure, like 20% or less. If you close off the line of credit, you lower your credit available and increase your ratio, harming your score.
As long as there are no fees involved, just leave it open and forget about it.
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#3 written by Preston L 1 year ago
If you have no plans to buy anything important for a while, you might as well keep it open, use it once in a while, and benefit from the positive credit score it will give you. However, if you plan to buy a car or house in the near future, close it since a potential creditor will total up your available credit and compare it to your income and that might hurt you.
Closing the account should not negatively affect your credit at all. Keeping it open can limit future credit.
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#7 written by vwang 1 year ago
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No real reason to close the account, just don’t use it anymore. When creditors look at your credit score they look at several different things to determine your credit worthiness.
How you handle your credit. Do you pay on time?
Debt to income ratio.
Total amount of credit available to you & what percentage of it you currently have used.
Say this account has a limit of $ 10,000 and you owe zero against it. Your other account has a limit of $ 10,000 but you owe $ 5000 against it. This gives you a total of $ 20,000 available credit with $ 5,000 owed against it or 25% of your total credit line is being used. But if you close the high interest account you will only have $ 10,000 available credit with $ 5,000 owed against it so now you have used up 50% of your available credit which makes you look like a higher risk for another loan.
Length of time (history) you have had each account.
If you close the older account you will lose the history you have with it. It won’t go away immediately but it will eventually be dropped.
To go one step further why don’t you keep it open & occasionally charge a low amount to it that you can & will pay off as soon as the bill comes in to continue building a good history with it without suffering the high interest for carrying a balance?
Creditors like to see you can handle your credit over a period of time.
Line of credit or credit card pretty much the same thing in the way it affects your overall credit.
Big difference would be whether or not you could tap it occasionally & pay it off without incurring any interest charge just to benefit from the ongoing history with the account. Even if you couldn’t it would still benefit you to keep it open for the time being just not to lose the history.