Closing an active account down can lower your credit rating in the following ways:

1) Length of time you've had accounts

If you close a card you've had for awhile it can impact your score because the older the accounts the better. Typically they will average the length of time you've had certain accounts; the shorter that number is the more points you lose.

2) Lack of Credit History

When you close down an account you no longer see if your "OK" Payment marks from making payments each month which is what the majority of your credit rating is determined by.

3) Loss of available credit

Most people think it's a good idea to close down an active card after they pay it off; however, it is not. When you close an active account down you are losing available credit to you and potentially making your other debts look worse. IE, if you have 2 cards with 1000 dollar balances, you pay one off and close it and you have one that is using 900/1000 you will hurt yourself more than you help yourself. If you kept it open you would still have 2 cards one showing 0/1000 used and one showing 900/1000 used, instead of just having one card that is maxed and your overall credit limit looking like its pretty much maxed out.

For your situation; I'm not sure how that will appear on your credit report. I don't think you can "close" an account that has a balance, so they would use some type of "freeze" tactic and that can't look bad on your credit report. You may get some bad marks until you clear that off. But again, I'm not entirely sure.

Originally Posted by green_bay Is closing an active account lower your credit rating or does it do worse things than that? Im trying to lower my APR and pay off one of my cards and the representative from Citicards let me know I can close my account and still pay it off and that it would freeze my account and make the interest to zero and it would look a little bad until i have paid off my account or reapply with them and open up my account again. This will also reduce my monthly minimum that way I can pay off the principal faster instead of just paying interest. What am I missing from this big picture or have I been told everything? Thanks again!!

Originally Posted by green_bay Well my minimum payment right now is almost $800.00... Long story short had a very bad motorcycle accident and completely couldnt pay bill now they are offering me lower payments so i can keep my credit good and not have it sent to collections. I just dont want this to ruin my credit as ill be getting student loans to finish off college and dont want that affected.

Originally Posted by green_bay Thanks Robert, but are these student loans that bad? Im just not the type to work full time and be in school.. Part time would be ok. Isint being a graduate and in some debt better than being just a high school graduate with no debt? You have a lot higher income percentage being a graduate.