Many people find themselves in credit card debts that they simply cannot afford to pay without any form of assistance. This is why many people had to sign up with debt management agencies like Freedom Debt Relief so that they may pay off their debts systematically and often at a reduced amount. These agencies may help you to negotiate with your creditors to reduce the amount of your debt and help plan a repayment schedule at a rate you can afford. They may also act as mediator between you and your creditor and all payments may go through them as they usually may be the party in charge of making sure your creditors all get their money as agreed in the new repayment plan.

Once all the debts are paid off, you may want to stop yourself from ever getting into such situation again. You want to live your life free of debts and since credit cards were the reason that got you into that mess before, it may only be logical that you decide to close your credit accounts so you may no longer be tempted to use them, wisely or otherwise. If you close a credit card account with a high interest rate you may be doing yourself a favor in the long run because the high interest rate may actually cause you to spend more money and accumulate more debt. You may even train yourself to reduce spending temptation by cancelling your credit cards. If you have credit cards that you have never used it may be beneficial for you to close the accounts to prevent identify thefts.

Closing your credit card accounts may also be rather detrimental to your credit rating. This is especially true if you have had good history with your credit cards because you may be erasing good information that may boost your credit rating with banks and lenders. Generally if you keep your credit cards current you may improve your credit score so by closing the accounts you may no longer have any means to have your credit company to report the positive information. You may also think that by cancelling your credit cards you may be able to stop your credit score from dropping but you may not know that any delinquency in your account may stay in your credit report for years even though your credit card account is closed.

Generally, to keep a good credit score you may have to have different lines of credit to base your report on. So if your only means to a good credit score is your credit cards it may not have been a good idea to close them all even if you feel like you need to stop yourself from abusing your credit cards. If you have few or no source of credit, your credit score may be affected negatively. This may also depend on the type of credit line you have. For instance, credit bureaus generally prefer credit cards from banks rather than the department store variety. So if you do wish to close your credit card accounts it may be a good idea to get rid of the department store credit cards and keep the ones you obtained from banks. You may consider applying for them again later by applying for new credit lines frequently may also affect your credit score negatively.

In general, you may close a few credit cards accounts especially those with high interest rates and the department store credit cards. It may be a good idea to keep a few credit cards and use them wisely so that you can maintain good credit score at all times. However, it is advisable that you make sure you have paid all the balances on your credit cards prior to closing them to avoid any negative report on your credit report.

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Category: Finances
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