Online Personal Credit Reports & Credit Scores

The consequences of closing accounts

Dear Audrey,

My credit report is messed-up and I need your advice. I have been having trouble with my credit ever since I paid off all my debts and closed the accounts last year. My credit score has not improved since I closed these accounts. In fact, my credit score is actually lower than it was before I started. What is happening? Please help me improve my credit.

Lamar C.

Dear Lamar,

Paying off your debts and closing all your accounts is a good way to reduce your monthly expenses, but not the best way for you to improve your credit. Closing all the active accounts on your credit report leaves lenders with little information for evaluating your creditworthiness. The lack of positive recent account information is probably what harmed your credit score.

You should try opening a credit card to establish a new record of responsible credit use. You can try opening a "secured account" if you have trouble being accepted for a standard card. This type of account uses your savings account balance as collateral for the credit limit.

After a few months of responsible use with the secured credit card, your score will improve and you should start receiving standard offers in the mail. You can find secured card offers online and sometimes through your bank or credit union. Make sure you read the fine print before you sign up.

Best wishes,

Audrey O'Dell