Quote:
Originally Posted by polarity
I could be wrong on this but in my study of credit over the last few years I've learned that closing ANY account (unless it's one of your newest) will hurt your credit score. Part of what helps your credit score is based on average age of accounts in good standing. So if you have a credit card you got when you were 30, a house when you were 35, car when you were 36, and a new credit card you got when you were 36 and you're now 37, and all are in good standing your average credit age is 2.75 years. If you close that first account obviously your number would go down, since you lost your oldest credit account.
This could be wrong, feel free to correct me.
-William
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Closing the account and continuing to pay it off, doesn't hurt it...at least as I understand it. Plus it locks the interest rate. As far as maintaining a credit score, if the end result is that you want all your debts paid off, and pretty mcuh go to a cash-only method, then it doesn't matter.
That said, we closed both of our credit cards before I bought the Z, and was able to secure a 5.8% APR, without hitting a credit union. I was able to get 6.25% APR through my regular bank.
Lastly, there are two types of credit. Loan Credit, and Revolving Credit.
Revolving Credit is what credit card companies look at for a history of making payments on time for an open-ended loan. This is what affects your APR and credit limits most initially, well, that and your debt/income ratio.
Loan credit is for car financing, bank loans, and mortgages - anything with a set end-date. This is for determining APR or approval for a given loan, and what they'll loan you for, as well as your debt/income ratio.
Now, if I tried to open a credit card RIGHT NOW, I'd probably get a craptastic offer, but, since my intended goal is to NOT HAVE a credit card, I'm well on my way.