- Cutting up a credit card will help prevent misuse of the account.
- Closing a zero-balance account may increase your debt to available credit ratio.
BILL'S ANSWER
Although cutting up the card will likely prevent anyone from using it without your knowledge, having a pre-approved line of credit floating around is not a good idea. You should contact the credit card bank and cancel the account, even if you never activated it. Once you have cancelled the account, you should destroy the card to make sure that your personal information is not used without your knowledge. By taking these steps, you should be able to prevent this account from affecting your credit report while preventing your credit profile being misused.
In regard to the account you are currently paying off, you should feel free to close the account once you have paid it off if you do not intend to use the account in the future. I encourage most consumers to close paid off accounts in order to prevent them from succumbing to temptation and charging up a new balance after working so hard to eliminate their credit card debt. Closing accounts after paying them off may slightly lower your credit score, as closing lines of credit with $0 balances will increase your debt to available credit ratio, one of the major factors used in calculating your credit score. In addition, closing long established credit lines can have a negative impact on your credit rating. However, the small change in your credit profile closing this one account will cause is probably worth the benefit of ridding yourself of this credit account and the temptation associated with it. After working so hard to pay off this account, it would be unfortunate for you to end up in the same position in a few months? time; closing the account will prevent this from happening.
To learn more about credit, credit reports, and credit scoring, I encourage you to visit the Bills.com Credit Resources page.
I wish you the best of luck in your future endeavors, and hope that the information I provided helps you Find. Learn. Save.
Best,
Bill
January 14, 2011
January 14, 2011
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