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Closing old credit accounts/ credit score.

(13 Posts)
nanetterose Sat 30-Jul-16 17:04:57

I'd always thought that it was better ( for credit score purposes) to leave accounts open . I've cleared a few things recently - credit card/ catalogue. I thought l'd just leave it that way. While checking my credit score,the advice from experian - indicated that closed accounts give a more favourable score? What is the general advice these days please. Thank you.

nanetterose Sun 31-Jul-16 00:33:57

Anyone? smile

babyiwantabump Sun 31-Jul-16 00:38:01

Closing accounts is better - as it makes you less of a risk as you have less available to spend if that makes sense.

nanetterose Sun 31-Jul-16 04:15:38

Thank for. I will do that in the morning! smile

delilahbucket Mon 01-Aug-16 12:43:32

If you have lots of "available" credit showing then any future lender is going to question why you want more credit. When assessing your ability to pay back any borrowings they have to consider if you could afford it if every account you have is maxed out.
That is why you are a higher risk.

nanetterose Mon 01-Aug-16 12:58:25

Okay. None of my accounts are maxed out. In fact l just paid them off!
The reason l asked is because l'd always heard it was okay if your loan - to available credit was high ,then that was favourable.
I lived in the USA a long time, the advice there was to never close accounts as that really harmed your score. Anyway...l tried to close a couple this morning and found l'd need to call them grin Thank you for the time to reply .smile

nanetterose Mon 01-Aug-16 12:59:16

*taking the time .

e1y1 Mon 01-Aug-16 13:17:20

Yes, better to close unused accounts.

Reason is, your credit report also shows besides score (and numerous other things) how much "available credit" you have, basically how much debt you have access to.

It also shows what percentage of that credit you have used (so say if you have access to £50,000 of credit across your accounts and you had £25,000 used, that would be 50% credit utilization) so creditors may question why you need more, and how would you manage more along with what you owe? Likewise if you were at 95% utilization for example, applying for more would seem you need credit to get by so thus a risk.

The credit "score" is actually tosh, no one has a set score.

All that happens is when you apply for credit, the company looks to see if you would make an "ideal" customer for that company and that you are a "good risk".

Even if you have a 999 score, if the company in question believes you are not the best "ideal customer/good profit risk" for them, and they are in a position to do so, they could turn you down.

Each company is different, hence why one may decline you and another accept you.

nanetterose Mon 01-Aug-16 13:22:39

Thank you e1y1 . That definitely makes sense. smile

delilahbucket Mon 01-Aug-16 13:22:55

They're not maxed out no, but they could be, which is what a lender has to consider. There is nothing to stop you gaining more credit from a new lender and then going on a spending spree.

nanetterose Mon 01-Aug-16 13:26:59

Yes,true Delilah
It is a strange old business.
What prompted this, was my previously perfectly managed Next account was suspended! shock
I'd just paid it off. Wasn't much,( 200) but l had a credit line of 5000!

e1y1 Mon 01-Aug-16 13:45:55

NEXT are a nightmare - they constantly keep an eye on your credit report through "soft searches" and manage your credit limit/line accordingly. Mine used to change nearly every month, credit limit got up to something ridiculous at one point.

You're completely right, it is a funny "balancing game" as too much credit = risk, too little credit means you're classed as not "financially active" so = risk!

I used to deal with contract accounts customer service for a mobile provider , and could always predict if someone who had just taken out an account was going to run into issues or be in the hands of debt assistance within a month!

delilahbucket Mon 01-Aug-16 14:20:04

I didn't know next did that. I have an account with them that is at the top end of their allowable limits but I do use it almost every month and then it gets paid off every month.
I'm probably a lenders worst nightmare as I have several available lines of credit but that is because I have different credit cards for different purposes. They all get paid off monthly, but I am maximising things like cashback or even I have one that is fee free to use abroad that I won't get rid of. I have a barclaycard that I only use for a couple of quid every few months to keep it active. I've had it years. I reduced the limit down to £500 (from £2000) when I was looking to take put more credit. Last year they put it back up to £2000. Think they're trying to get me to spend on it!

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