Credit Restoration Tip #1 - Closing Accounts

There is a lot of bad information on the web from supposed "credit experts" who are nothing of the sort, but are posting advice on the Internet, where credentials can't be checked. Beware of what you read. I'm going to tell you the Top 5 misconceptions of credit restoration (and credit in general).

Misconception #1 - Closing your credit card accounts will improve your credit score.

Huge mistake. According to the FICO credit score model, a large portion of your credit score is your debt-to-credit ration (utilization ratio). That means you should pay off your debts if your want your score to rise.

But, another portion of your score is determined by the length of your credit history. So, let’s look at a typical credit card holder with a $500 balance on a $1000 limit. They have a 50% utilization ratio. If they paid this down to under 30%, they’d be golden.

But let’s say they take some bad credit advice off the Internet, and close their account. Wham! They’ve now truncated their credit history down to zilch, but they still have that balance.

The credit model will actually dock them for closing the account! Cut up the card, freeze it in a block of ice, whatever it takes to stop spending on the account, but never, ever close it unless you’ve paid it off, and have another account to take its place.

Please check out our next credit restoration tip (#2).

Credit Restoration by Lexigton Law
Lexington Law has helped over 1/2 million clients restore their credit legally and effectively.