Factors to Consider Before You Close Your Credit Account

Poor credit does not just happen; it is the aftermath of a neglected financial commitment which the borrower might not have had control over. Having good credit scores can be the key to unlocking financial hurdles and that is why it is important to maintain nothing but that. In the event that a borrower finds themselves in a situation where their once good credit scores have changed for the worst, the best approach would be to strategize on how to get a good credit score. There are many ways which people have used to regain their good credit scores with success, evidence that bad credit can be reversed. It is, however, a process and those who succeed in it must be prepared to seek alternative sources of funding for their projects and cut down on their expenses to reduce their need for credit. In the end, this dedication to make an otherwise hopeless situation can be better and with a history that will cause every lender to agree to any credit facility applied for. While it may not be a good move to close down all accounts that have been affected, some people still consider this to be their only option of how to get a good credit score. Before you decide that this is the only way to redeeming your good credit scores situation, there are factors you need to consider; here are tips that will be useful in analyzing the impact of this decision on your credit situation.

Understand the debt ratio

One of the components that significantly contribute to a borrower’s credit score is the ratio of credit utilization. In good credit scores, this ratio means that the amount of credit money you have used in relation to the credit limit of your card is favorable. For instance, if you have a zero balance utilization on your credit card, lenders take that to mean that you are making monthly payments as needed that is why you have offset your debt to the ground. If you were to close down this account, it would mean that you also close down the credit availability. If you are keen on finding ways to how to get a good credit score, this scenario will be counterproductive. A zero credit limit and a credit balance of zero results in a high credit utilization ratio, which lowers good credit scores.

Personality versus benefits of having a credit account

Owning a credit card can be beneficial if you have mastered the art of self-discipline. Unless you are struggling to control your spending habits, it would not be a good idea to close down your credit accounts. The more debt you have, the easier it becomes to accumulate more and lack of financial control can make a bad debt situation worse. Making an analysis of how your debt situation has changed over a certain period can be the insight you need to decide if the debt is growing or reducing. If it is growing, and the greatest reason is the use of credit, by all means, close down the account. Owning a credit card offers the holder financial freedom but at the same time requires a great deal of financial discipline. Good credit scores are a result of deliberate and conscious decisions to obtain borrower credibility.

Take care of logistics

Closing down a credit account does not bring to an end your financial obligations. You will definitely be free from the monthly installments to be paid for the utilized credit but other recurring payments such as telephone bills, club memberships, and utility bills will still require offsetting. Due to the fact that these still require prompt and full payment regularly, arranging for alternative payment methods will save you great inconvenience. It is important too, however, consider your ability to make these payments off-pocket as it can be draining on your resources. The advantage of using credit in this regard is that you can pay your balance in manageable installments.

How to get a good credit score is a journey worth serious considerations. If account closure remains the only viable option, the lender must send a confirmation letter to that effect as soon as they receive the request. Checking the credit report within 30 days of closure ensures that there is no longer any credit activity in your credit history. This gives you a chance to rebuild good credit scores for future use.