Credit accounts can be helpful to build your credit score.  However, opening too many credit accounts in a short period of time can lower your FICO score.  So, it is important to keep a balance between having too many or too few credit accounts.

 

Avoid opening too many credit accounts at once or closing them too quickly.

In the early 2000s, it was a common practice for people to open credit cards and store cards to help build their credit. The problem with this is that it’s become more difficult for people to close these accounts when they can’t pay their balances off each month.

Closing too many credit accounts can have a negative impact

Closing too many credit accounts can have a negative impact on your credit score.  One common cause for this is when you close accounts without giving enough time to the lender to see that the account has been paid off.

What are some of the consequences of closing too many credit accounts?

It could be hard to get approved for loans in the future if your FICO score is low enough.  Your current interest rates will increase as you borrow more money, and it will take longer to pay them off.

 

The lender could apply for a chargeback, which can be very costly. When an individual closes a credit card account, they are often hit with a “credit-kill” fee or cancellation fee.   While closing an account will help reduce the number of hard pulls on your credit report, it may not make financial sense because it will have a negative effect on your FICO score and increase your interest rates.

 

If you’re looking to improve your credit, just be mindful of how you treat your credit accounts.

If you want more information, please reach out.