Remember to Cancel Finished 0% Financing Lines of Credit
This year I had new windows installed (in part to take advantage of the energy tax credit and because the windows were 20 years old) and I took advantage of a 0% financing offer from Castle Windows to fully finance the $7,000 purchase of nine windows and three sliding doors. Six months later, we paid off the $7,000 and smiled as it resulted in a nice 2.5% discount from the interest we earned by putting those funds away in a high yield bank account. Then yesterday, as I was cleaning up some papers, I saw an old statement from GE Money Bank/Project Line, the lender that gave us the 0% financing money. On a whim I tried to log into my account to see if it was active and it was! I had erroneously assumed that the line of credit would be closed after I paid off the loan - aaaaannnnn (that’s a buzzer folks!), wrong!
So, my tip of the day today is to remember to close out those 0% financing offer accounts because there’s no sense having a line of credit open that you’ll never use. The credit score equation calculators will say that having more credit is good because it lowers your utilization and will improve your score, but I argue that having an account that’s “out of sight, out of mind” is dangerous because you won’t keep your eye on it. Let’s say someone gets access to it, since you aren’t checking that account you won’t find out about it until the first bill. That’s bad.
So, if you’ve opened up lines of credit like this, remember to close them out after you’ve used them because they won’t close themselves out automagically.
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4 Comments - Share Your Thoughts
Thanks for the tip! I forgot about a no interest account that I used when I bought my new furniture…I’ll be sure to close that now!
Awhile ago I was reminded of a similar credit line I used for buying furniture. It’s not always apparent which bank is extending your line of credit for the furniture store, so I was surprised one year to see a line of credit from HSBC. Huh? When I called them, they told me how it was opened… Oh yeahhhhhhh. Please close it, thank you.
Now I know why I was getting these change-of-term notices from HSBC in the mail.
The only “ding” I ever had on my credit was from an open credit card account that I never used, but that started to charge an annual fee several years after I got the card. They mailed me the standard notifications, but I was living overseas for a few months at the time and had only made arrangements for bills I knew about, not new ones from out of the blue.
So, naturally, they didn’t get paid since I didn’t know about them.
By the time I got back, my credit had been messed up in various ways, and it took a couple of years to unwind the mess.
Lesson learned: if you aren’t actively using the credit, cancel it.
Actually, try and find out who the parent lender is (like HSBC lender in comment above). If you already have a line of credit with them, have them move it to one card.
This is actually good to do b/c I was able to move my limits from a card that was going to offer 4.9% life of loan to my other card from the same company for 0%.
Also, don’t close immediately as that will hurt the score more. You should have the credit open for at least a year from what I’ve read to avoid any credit score dings.
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