Should I Re-open Closed Credit Card Accounts

I had some credit card accounts with high balances so I closed them. I have been paying on time since I then. I was surprised that when I closed them, it actually hurt my credit score. Even though I don't use them anymore, should I re-open them for it to increase my credit score?

Mom's Answer: It is unbelievable how many times I have heard this. People think if they close an account it is going to help their credit and it just is not true. It is quite typical for your credit score to decrease when you close an account.

First of all, the main thing to understand is that a good portion of your score is based on your “payment” history. Only when your account is open does it affect your “payment” history.

So if you are making on time payments anyway keep the card open so you can benefit from your positive actions as well as the length of time you have had that credit line. The longer the time you have had an account definitely helps your score also. If you close the account, then you lose that lengthy history.

If you chose not to use the credit card anymore because you cannot trust yourself then just take the scissors to the card and cut it up. This way you don’t close it but you really can’t use it either.

The credit scoring model takes into account a person's financial history. If you close the account on a card with good or bad history, you totally lose that history which can cause your score to decrease.

Although balance information is also taken into consideration, its not if you have a running balance on a card, it has to to with the balance to credit limit percentage.

Now as far as re-opening it, that would depend on the company you are working with. If you are able to literally re-open it and “bridge”..meaning that it hooks the total time you have had that card, then my guess is that it would help your score because you would get your history back. However, if it opens it as a new account, it depends. A new account with a balance will hurt your score in the short run but in the long run with regular payments, it will prove beneficial.

My advice next time is to leave the card open, stop using it for new purchases, shred the card and of course make payments on time.

More on closing credit card accounts.

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