increase credit score?
To increase your credit score When you pay off a credit card is it better to close the account or keep it open showing a zero balance?
Public Comments
- Close the account. If you leave it open it will show on your credit report as having instant access to whatever your credit limit on the card is which will reduce your credit score.
- KEEP IT OPEN!!!! About 30% of your FICO score is made up of your debt to credit limit ration....If you have 10 credit cards with a spending limit of $1,000 each and you have a TOTAL balance of $3,000, your total debt to credit ratio is 30%. If you close 5 credit cards you're not using, your debt to credit ratio jumps to 60%!!! Keep them open. ESPECIALLY IF you have had them opened for a significant amount of time. Creditors/banks/mortgage companies, etc. LIKE to see you have a long credit history....Check out the Suze Orman book: Money book for the Fabulous, Young, and Broke...You will learn everything you need to know about money! I gave one to EACH of my friends for Christmas....it's only a $15 book. Also, you should NEVER EVER pay a maintenance fee/annual fee for a credit card!!!! It is throwing away money because you can find plenty of credit cards you can use for FREE!!!
- In order to increase your score you will have to use the card, and pay off the balance each month. That is the best way to increase the score. Also, keeping the ratio of used credit to available credit low is important. Those are the two biggest factors when determining one's FICO score in the current model.
- And now for the REAL answer: This is what makes up your credit score: 1. Payment history- 35% 2. Total debt owed to avialable credit ratio-30% 3. Length of time establishing credit-15% 4. Types of credit established-10% 5. Inquiries and New accounts-10% Closing an account decreases the amount of combined available credit making it look like you're owing more than you're able to borrrow. You should have as much of a cushion of available credit as possible. My suggestion is this: After you pay off the card, from then on I would make small ($20/month max) purchases that can be paid off in full on time every month to show activity. This way you show activity, without going into debt.
- It really depends. If you only have a FEW credit cards, then keep it open. If you have 5 or more credit cards, close it. The credit bureau doesn't like to see you have a ton of open credit cards. On the other hand, the bureau also looks at your outstanding BALANCES in relation to the credit lines that you have available. If you close out all of your zero-balance cards, it could have a negative impact on your credit score. I think you will find this site to be helpful... http://creditscorerescue.com
