3 Ways to Close Credit Correctly
If you checked your credit bureau report and realized that you have too many active credits and want to fix it. Then this article is for you, as we will tell you how to do it in three simple steps.
Before we begin, remember that having a multiple open accounts is important for you to have an acceptable credit experience. However, too many can affect your credit score.
Having clarified this, let’s get started:
1.- Choose the credit account to close
Ideally, you should make a list of the accounts you have open at the moment, including how much you owe, for how long, what interest rate you are being charged and for how long.
From this, you should choose the loans you will pay off. It’s recommended you start with those that charge you the most interest, since they are the most expensive.
But, remember that you should be especially careful with credit cards, since canceling the oldest one will affect your credit history. So, if you have more than two cards, the ideal is to close the newer one.
2.- Consolidate your credits
Once you have chosen which accounts should go, you will probably think that it is impossible to close all of them at once, since you do not have enough money to pay everything you owe.
But don’t worry, because there is a solution and that is to look for a financial institution that allows you to consolidate your debts. Meaning, apply for a personal loan using which you will pay what you owe on the credit you selected, with a much lower rate than the one you were paying.
This, in addition to helping you close the accounts that were putting your score in check, will save you interest and allow you to concentrate on a single payment, instead of several. It may even be less than what you were paying before.
The best thing about this step is that your consolidation can be done from home, since there are many fintech companies, that offer this type of service. Just remember that in order to access this type of credit your credit history must be excellent.
3.- Make sure you close your loans
Once you have acquired a loan to consolidate your credits, the finance company will pay the debts you had. However, you should be aware of any errors that may occur in traditional banks.
For example, there are some that do not close the loans automatically and, even if you no longer owe a penny, they continue to charge you interest. So you should make sure that all of them will close your accounts correctly.
To do this, you will need to call the institution from where you’d taken the loan and make sure that they close it correctly. Some may even ask you to go to a branch to do so. Ideally the lender should give you official credit closure letter.
Finally, remember to continue paying in a timely manner the accounts that you leave active, to continue having a good history and improve your score.
I am Nikesh Mehta, owner and writer of this site.
I’m an analytics and digital marketing professional and also love writing on finance and technology industry during my spare time. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected] or LinkedIn profile.