Unused credit cards - is it time to close them down?

Over 16 million people have unused credit cards. Many keep them as a financial safety net but they could have a negative impact on your credit rating and make you more vulnerable to credit card fraud.

Credit ratingAccording to research from uSwitch.com, whilst some consumers cut up unused credit cards or simply stop using them, many don’t actually close the credit card accounts.

Keeping these credit accounts open though could negatively impact on your credit rating - used by credit providers to determine whether or not to grant credit.

You might like to check your FREE credit report - it will show exactly what credit accounts you have and you can easily identify any you no longer use or spot if there are any mistakes on the information held.

You are less likely to get new credit if a credit provider assesses your credit score as low, and this could be at least partly driven by a belief that you already have too much credit available, contributed to by unused credit card accounts, and your ability to repay debt on time.

As well as a negative impact on your credit rating, keeping unused credit cards could more readily expose you to fraud.

Fraudsters often try and intercept new credit cards sent through the post.

If these are for dormant accounts, the cards could well be being sent to old addresses and it could be some time before you identify your card has been used by the fraudsters.

Louise Bond, personal finance expert at uSwitch.com, said ‘Overall it seems people are bombarded with conflicting opinions as to whether or not they should close credit card accounts that they no longer use.

In times of such financial turbulence, it’s hardly surprising that people don’t want to let go of what they consider to be a financial lifeline.

There are several issues to consider as credit checks are influenced by the amount of credit available to spend. So in effect, this lifeline could become a financial bottle neck to the next best deal.’

If you do apply for a new credit card but are rejected, don’t just keep applying and hope that you will get accepted. Your credit rating will be negatively impacted for each failed application.

Before reapplying, check your credit report, and see if there’s anything you can do to improve it - you may find our article ‘Your credit rating - how to improve it‘ helpful.


Source:

A very interesting article related to Free Credit Report and Score in Canada. For more updates regarding free credit report services, check credit online score, and business credit report, subscribe to Free Credit Report and Score Canada blog.