Canceling your credit cards can be a positive boost for your pockets. Many people do not realize the option of canceling and therefore continue to destroy themselves to the point of no return or worse, skip this option and go straight to bankruptcy. Bankruptcy should be the very last option for anyone struggling with debt. You should first try everything imaginable before filing for bankruptcy. If you haven't already canceled then bankruptcy should not be in your thoughts just yet.
In most cases, it can negatively affect your rating to cancel. A percentage of your score is based on the history that has been established. However, there are times when canceling can be an effective decision. Use these guidelines to know when you should cancel:
Cancel if You Have Zero Balance. Canceling with zero balance has the least effect on your score. When you cancel with a zero balance, it does not affect the portion of your score that is determined through your debt to balance ratio. Your score may see an impact from the canceling, but this can be increased over a period of time.
Cancel if You are Unable to Stop Spending. Cards with zero balances and increasing limits can be tempting to those consumers that are living on a tight budget and have faced debt problems in the past. If you are one of these consumers then canceling may be your best option, rather than live with the tempting credit line. This is a sure way to avoid future debt and is worth the small drop that may occur in the score.
Cancel if You Have Multiple Accounts. Canceling if you have multiple accounts can reduce the risk of identity theft. When you request a copy of your report, you may even be surprised at what you have open! Some of these open markings may never have been used after being activated, often; if these accounts are not closed then they can remain open for years, thus increasing the risk of identity theft or fraudulent activity.
Cancel if You Have Established Negative Credit History. There are some instances that consumers have established negative history. If you have missed payments or have had numerous late payments then you may benefit from canceling. It is important to avoid these behaviors and ensure that positive history is created from the first month that the card has been opened. Note, canceling does not free you from the debt, you will still be responsible for paying off the current debt but by canceling you will not incur any more debt.
Canceling can be as easy as contacting the card company to request the cancellation. The company may resist your request, but it is important to be direct and not waive the decision to cancel.
If you intend to open a new loan in the next year, then the account should remain open. This is an important factor in the credit rating and therefore it is important to take measures to increase and maintain the credit score - rather than closing accounts which may prove negative to the score.
Michael David is an expert writer who has years of experience writing and producing quality content. For anyone who is having financial troubles and wish to live a debt free lifestyle then I'd recommend reading Dave Ramsey's Total Money Make Over. It is a financial guide and strategy for living a debt free. Dave Ramsey is a world renowned financial guru, with a track record for helping families get out of debt.
Article Source: http://EzineArticles.com/?expert=Michael_W._David
No comments:
Post a Comment