Can I Raise my Credit Scores by Paying Off my Credit Cards and Closing the Accounts?

The credit score was designed to show lenders how much of a risk a consumer can be.  The higher your credit scores are the lower the risk you are to creditors and obviously the lower your credit scores are the higher the risk you are.  When it comes to your credit and credit score, paying off your credit cards and credit accounts is always a good idea and can help raise your credit score.  However, closing your credit accounts does not always help your credit score, even if they are paid off.  Sometimes closing your credit accounts will even lower your credit scores.  Let me explain why.  When you pay off an account it helps raise your credit score in a couple of areas.  First, it helps the payment history to show that the account is paid and positive.  Second, it shows you have less money you owe on that account and on your overall credit. But, the downside is when you close your credit accounts you are stopping your payment history on that account, therefore shortening the timeframe of your payment history. If any of the credit accounts you paid off have been open for 2 years or less than you are ok to close them out because you are not getting rid of a long history. However, if you have had the card for 5+ years than I would recommend you keep it open so you don’t lose that payment history. Payment history counts as 35% of your credit score. What this means is that the longer you have your credit accounts (mostly credit cards because they are revolving) the better.  Your credit score takes an average of your payment history time frame, for example, if you had 2 cards for 10 years and 1 card for 1 year, the credit account that you have only had for a year is actually bringing down your average.  So, if you pay the accounts off that is great but don’t close them unless you have to and if you do close any, close the one you have had for a year so your average will go back to 10 years.  This will help your credit score!

Good Luck and with any other credit questions, ask our Credit Expert Kristi Thornton by emailing your questions to lynn@ovationlaw.com.  You can also call any of our Case Analysts at 1-866-639-3426 Option 2 or check out our site at www.ovationcredit.com.

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