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Good vs. Bad Credit
Reading a credit report can seem like reading hieroglyphics at the pyramids. Part of the challenge lies in understanding exactly what lenders want to see when they check out your credit history.
One big question on the minds of those who want to reduce their debt and improve credit is “Should I close credit accounts that have been paid off or that I no longer use?” The answer is probably not, according to experts.
If your account is in good standing—meaning you paid it regularly and on time—leaving it open is a better predictor of creditworthiness in the minds of lenders, because your credit score will be higher. From their point of view, having available credit is a measure of your ability to pay it back.
Be aware, however, that if you’re hoping to remove a blemish from your credit report by closing an account that wasn’t in good standing, it will be awhile before it becomes history. Closed accounts remain on your credit report for ten years, and any negative history lingers for seven years.
As always, the best way to improve credit is to keep balances low, and pay them off on time. [Kiplingers]