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If you've transferred your credit card debt to a lower-interest credit card, should you cancel the old card? Most financial experts say you should. However, be sure to do it in a way that won't affect your credit report or you may compromise your ability to get finance in the near future and you may get declined for a loan because of something you could have avoided.
Credit card accounts that you aren't using are a temptation that many consumers think could be a big financial risk. Closing accounts you don't use helps you avoid temptation. You can also avoid credit fraud or annual fees by closing accounts that you no longer use. However, this must be done the proper way or you could end up having problems.
Make Sure It’s Closed
Don't just cut up your cards and throw them away or send them back to your lender. It's important to follow up to make sure your account is really closed. For people planning on obtaining a vehicle or mortgage, following up is an important step. If you are counting on having the account closed but you don’t make sure you may risk to apply for a financial product you shouldn’t and getting declined will affect your credit even more.
The First Steps
First, call your credit card company's customer-service number on the back of the credit card. Let the customer service people know you are closing the account. Ask for an address and a person or department to whom you can send a confirmation letter regarding your cancellation. Follow up with a short letter confirming the cancellation.
It may Take Some Time
Credit card companies will take their sweet time closing your account. Don't be surprised if you get phone calls from them offering better rates or perks. Wait a couple of months and request a copy of your credit report to see if the account was closed. Be sure the report states that YOU requested to close the account.
If the report says the account was closed by your creditor, it could negatively affect your credit report. Ask the credit card company to fix the report if they've made this mistake. It may sound as just a simple fact, but it is one that may lower your credit score significantly so do make sure this gets fixed as soon as possible.
Think Ahead If You Plan to Apply For a Loan
If you are closing accounts in preparation for applying for a mortgage loan, do it at least six months in advance. Open accounts are considered “potential” credit by lenders, and it could affect your ability to qualify. However, a mistake added to your credit report could also cost you, so be sure to follow up.
Closing unused credit cards can bring many benefits to your financial life; however, you need to do it in such a way that it won’t affect upcoming financial transactions. As a general rule, do it only if you don’t plan to request any financial product for some time and check that the closing of the account is actually completed.
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