Which credit cards should I close when consolidating cards?

Credit card consolidation occurs when a consumer takes all of his or her debts and pays them in a group. Ideally, the credit cards with the highest interest rates are the ones that you should close. You do not need to close any of your credit cards during the consolidation process, unless your creditors specifically request it.

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Because credit card consolidation is almost never granted unless you have already fallen behind with payments, there is a good chance that many of your credit card accounts will be closed whether or not you are able to fully catch up. The Federal Trade Commission lists documentation that explains what creditors, financial institutions, and credit reporting bureaus can and cannot do as it relates to delinquent debts. Debt consolidation can provide you with financial relief, but you must be extremely careful about the company that you choose as well as how you decide to go through the process.

Can you be penalized for consolidating and closing your credit cards?

If your creditors are willing to work with you through the consolidation process, they might be more willing to keep your credit card accounts open. Many credit card issuers have what is referred to as an internal review process. These companies will review your credit card account, specifically looking at the latest repayment history as well as your overall credit score. Although there are no guarantees, you may be able to preserve your credit card accounts simply by asking to be reviewed.

One drawback to the credit card consolidation process is that it takes time. You cannot force your credit card companies to reduce your interest rate or your principal amount, and any payments that you miss while in negotiation will be documented on your credit report. This is why it is a good idea to consider credit card consolidation as soon as you start to experience financial troubles.

Will closing my credit card impact my credit score?

Consumers can also consolidate credit card debts after their accounts have been closed. These credit card consolidation programs are usually operated by the credit card issuers themselves. Although you will still have a somewhat damaged credit report, this is still better than letting your credit cards become charged off. You may receive a repayment plan set to last around 60 months, and your interest rate will be much lower.

However, when you work with any credit card consolidation company it is important to remember that you must hold up your end of the agreement. All of your payments must be received on time by your creditors or you risk having the agreement rescinded.

How can you reopen a credit card closed during consolidation?

Just as credit cardholders can ask to close their credit card accounts at any time, creditors also have the option of closing accounts for any reason. If you believe that you already have too many credit cards, you might not be too upset if you find that some of your credit cards have been closed. However, consumers that only have a couple of credit cards can become absolutely panicked.

Many credit card issuers will gladly reopen closed credit card accounts if they believe that their former customers’ financial outlook has changed for the better. You may need to consent to a credit pull before you can find out if your old credit card accounts can be reopened, but this process can usually be completed within just a few minutes.

Even with a virtually flawless credit report, you might find that some credit card issuers are unwilling to re-open your closed accounts. In some instances, consumers will be advised to apply for a new line of credit instead. According to the U.S. government website, the three major credit-reporting bureaus have their own unique ways of calculating credit scores. While you may want to have your old credit card accounts reinstated, you can still improve your credit history with a new account opened by your old creditors.

It will be extremely difficult for you to have a closed credit card account reopened while you are consolidating. It is a better idea to wait until you improve your credit score and you have paid all of your other outstanding bills before you ask to have your case reconsidered. Most credit card companies will consider reinstating a closed credit card account up to two years after it was initially closed.

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