Open lines of credit, balances and how they affect your score
One misconception most people believe is that if you have a credit line, the best thing to do is to pay it off and close the account. That couldn’t be farther from the truth. The fact is, that that exact misconception keeps a credit score down and prevents you from obtaining new credit rather than affect your score positively.
The way bureaus grade you, or the way your score is compiled is by your ability to make payments on a monthly basis. So if you pay off a credit card(s) and close the account, the bureaus will look at your account as a person that may be having problems maintaining current balances. If someone shows a lack of ability to pay it is usually due to loss of employment or something along those lines. So what happens is the score will decrease as months go by that you don’t have any activity or a significant decrease in activity.
Your most advantageous move would be to maintain low balances if possible below $50 balance. If maintaining account balances that low is impossible at the time the next best thing is keeping your balance below half or your limit. If balances are kept up near the limit for multiple months the credit score will begin to decrease since to the credit bureaus this will appear as a desperation to keep afloat and living off of credit to survive. Again, loss of employment is a common cause someone would use credit for everyday expenses and not pay it off at the end of the month. So in order to show lenders this person is a high risk the score will come down.
For more information regarding credit call or email at 480.344.3678 or email jesus.perez@academy.cc