Figuring out what’s best for our long term credit ratings can be confusing, especially when it seems there is so much contradictory information floating around. For instance, should you close unused credit card accounts if you’re preparing to buy a home? Which accounts should you close – the newer ones or the older ones? Keep reading as we go over seven things you should – or should not – be doing to keep your credit scores in tip top shape.
Age is Good
You shouldn’t close those older accounts especially if you’ve had an excellent relationship with that credit card company. Here’s why: let’s say you have three credit card accounts, each with balances that are paid in full. You’re getting ready to buy a house and a counselor has suggested closing one of those accounts so that it doesn’t affect your approval or offered interest rate. One credit card account you’ve had since 1990, one since 1999 and the other you’ve had for just two years. Your first instinct might be to close the one opened in 1990. You never use it and your APR rates are slightly better on the other two.
Right now, you have a credit history that goes back twenty two years. If you close it, you wipe out all those years of great history building. If you close the newer one, you’re keeping that twenty-plus history, but also serving your purpose of tidying up your credit history. Lenders want to see that you have a long term payment history that includes responsible, on time payments and the only way they’ll see that is if you keep the older accounts open.
If you’ve had some problems in the past, odds are you’ve dreamed of having a do-over. You know – a fresh start, a clean slate, a brand new chance to do it right. Well guess what? It might be possible. While your credit card company won’t own up to it, there’s a chance you might be able to re-age your account. This process allows you to bring the account current and stop late fees from accruing if you meet certain criteria. Usually, it includes at least three consecutive minimum monthly payments; a renewed willingness and ability to pay and if the account is at least nine months old. You’ll still owe the same amount, but your account will no longer be considered delinquent. Re-aging only makes sense if you have the ability to get back, and stay on, track.
It’s best to not assume the credit card company will automatically close your unused account. It’s not in their best interest; after all, as long as the account is open, there’s a good chance you might still use it. And did you know creditors can keep your credit line open indefinitely regardless of whether it is active? While there was a very short lived trend several years ago that included companies closing unused accounts, it’s a trend that’s maxed out its lifespan in the ever changing financial sector. If you want to find out if an account is closed, contact the credit card company either by phone or email. You should hear back, usually within a couple of weeks, with the answer to your question.
I actually stumbled upon this little gem several years ago when I was convinced the bank had credited my savings account instead of my checking account. I knew I’d written the right account number on the slip before dropping the checks into the night deposit, but the woman I spoke to insisted otherwise. She didn’t have the deposit in front of her, but she just knew a mistake couldn’t have been made on the bank’s end. Out of frustration, I finally said,
OK… look, there has to be someone else I can speak with. You and I are clearly getting nowhere.
Within seconds, a supervisor came on the line, heard my problem and went to find the actual deposit. I knew if I was wrong, I would likely pay an NSF fee since checks were likely going to clear in the next couple of days. Sure enough, she came back on the line with an apology and a
It’s already been credited to the proper account. We apologize and yes, you did specify your checking account on the deposit slip.
Total time on the phone with the bank: 18 minutes. Total time with the supervisor (counting being on hold for her to actually locate the deposit): 1 minute, 50 seconds. A supervisor isn’t going to be so intimidated by the possibility of the error being his fault. Customer service reps often are afraid of repercussions for mistakes like that. The thing is – it wasn’t a big deal. Even if I had made the mistake, I would have owned up to it and asked the rep to please deposit it to the right account – but I couldn’t even get her to seek out the deposit from that morning. The supervisor, on the other hand, thought like I was thinking: “Forget the blame game, let’s just fix it”. The decision-making power of customer service representatives is very limited. If you’re unhappy with the responses you’re getting, ask to speak to a supervisor .
Overwhelming One Card
Most of us can relate to that magical day when we’re able to move the balances from three credit cards to a single card. We dream of the lower payments, the lower interest rate and knowing becoming debt free is finally within reach. Before you make that leap, though, you should really calculate your credit balances. If your used credit exceeds 50 percent of the available limit on the card to which you are consolidating, your credit score may take a hit.
Don’t Trash – Destroy
By now everyone knows tossing a credit card in the trash can is an invitation to have your identity stolen or a credit card statement to show up in a month with bizarre charges. These days, you have to destroy the card. In fact, new rules tell us to not only shred or cut up our cards, but to toss pieces into several different trash cans. Crooks have become clever and tossing a credit card – tossed or otherwise – into one can is akin to handing him the card and saying,
Well, you can’t swipe it, but feel free to use the credit card number to do your online shopping.
Get Those Rewards
Before you close out a credit card account, take advantage of your rewards points. Even if you don’t have enough to get that jet ski (OK – who does, right?), you can always donate those unused points for your favorite charity. Contact your credit card company for information on how its process works as each credit card company has different ways of doing that. It’s a great way to give back and you can close your account with no frustrations over not doing something good with the unused rewards points.
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