Should You Close A Credit Card Or Let the Creditor Do It

While still a certain time back it would make a difference is to close the account the practice is no longer necessary important in the past if the lender) on it meant that the account was either not paid in full or that you defaulted on the account which is why the lender chose not to do business with you in the future. However in the current times it is a known practice with consumers to close and open accounts frequently in order to get the best deal available. This practice is also caught credit surfing.

The credit card industry has become highly competitive with the new credit cards and credit card service providers coming out with promotional schemes with lower interest rates and additional benefits all the time. It is common for a consumer to close one credit account only to move to a better deal. Which is why is no longer an important indicator of credit risk as to who closed the credit card account and is not considered in the calculation of the credit scores.

What does concern the credit score as for his opening and closing credit card accounts is the debt utilization ratio. While the surplus open revolving accounts are not considered favorably by lenders when applying for a more serious loans such as automobile loan or a house mortgage, additional credit card accounts increase your credit limit which further decreases your debt utilization ratio if you only use part of the total limit available to you. Carrying a low balance on your combine credit limit shows responsible use of credit with well managed finances. For this reason whenever you close the credit card account and increase the debt utilization ratio it could have a minimum, temporary or a long-term impact on your credit score. The amount of impact it makes will depend on the other cost of information present on your credit report. If you have managed your credit well and have plenty of positive accounts than the affect of closing one or two credit card accounts will not have much of a difference in your credit score.

But if you have marginal credit and increases in the debt utilization ratio as a result of the closing of a credit card account could tilt the balance is against you the result of which being being declined for the credit for an increase in your interest rates.

If you are unsure as to the effect of the various credit card accounts on your credit score then you can order a copy of your credit score from the National credit bureau which will most commonly be accompanied with a report that explains the effect of various factors whether positive or negative on your credit score. You will be able to determine which account is having how much of an influence on your credit score.