|by Brooke Kaelin|
One of our regular readers, Matt at Steadfast Finances, had this question for us:
Can you recommend a generic type of statement for people who want to close a credit card account just b/c they want it closed, or they think they have too many lines of credit open?
I’m curious if wording exists that could potentially give lenders a psychological moment of pause, or a vote of confidence in favor of the borrower, after reading the 250 word statement.
Thanks for your question Matt!
Matt is referring to the short 250 word statement you can place on any account listed in your credit report. The only time the 250 word statement will matter is if a lender actually views your entire credit report, and not just your credit score.
Times that a lender will typically view your entire credit report include:
- When you apply for a home loan
- An Auto Loan
- Or a personal loan
In these cases, the 250 word statement might come into play, but the deciding factor will still most likely be your overall credit score.
Now, to answer the question, yes there are right and wrong ways to use your 250 statement. Right ways would include an explanation of why it benefited you to close the account, identity theft, or an explanation of a late payment or complicated account.
The wrong way to use your 250 word statement would be to air grievances with your credit card company or other lender! Prospective lenders really do not want to hear about the time your credit card company processed your payment late, and refused to issue you a credit. They also don’t want to see that you frequently argued with your creditors if they are about to become one of them!
If you have a problem with your bank or credit card company, be sure to take it up with them, or with the Better Business Bureau. Do not attach it to your own credit report – your credit card company will never see it, and it will only make you look bad in the long run.
So, with that said, let’s get down to some specific examples.
For instance, most of us love to take advantage of those “in-store” credit cards, especially around Christmas. So, let’s say you opened up a credit card to take advantage of the 30% to 50% off deal they were having. After Christmas, you paid the card off and closed it. You would want to go back into your credit report, and make a note that says something to this effect:
I opened up this credit account to take advantage of a special discount. When the special offer ended, I paid off the card, and closed it because it no longer benefited me. I have other credit cards with excellent interest rates, and the default interest rate on this one was 24%.
Another good instance would be balance transfer accounts. You open them to take advantage of the low, or 0% interest for a specific period of time. Your notation could look something like this:
I opened this credit account so that I could take advantage of the 0% interest on balance transfers. Once I paid the balance down, (or the rate expired) I closed the account because of the high annual fee and increased interest rate.
Or, if you are in the process of streamlining your credit accounts – you have too many and don’t want to deal with them all – you could say something like this:
It is my belief that using credit responsibly means having only the number of credit accounts that I can safely and happily manage. I rarely charged anything on this card, and since I have other lines of credit that I prefer to use instead, I closed this account. The cards I kept had better interest rates, and lower fees.
In an identity theft situation, you would want to challenge the item on your credit report as well as make a statement. Hopefully you can have any derogatory information removed permanently. In case of identity theft you can use this notation:
This account is/was in dispute. I had my identity stolen on (date). All or part of the charges made on this card were made by someone other than myself. The late payments that show up are because I had no knowledge of the account (or because I am not obligated to pay for charges I did not make).
If you got ticked off with your credit card company and closed the account, and you absolutely positively must note it on your own credit report, you could put it like this:
The incredibly rude and unhelpful customer service representatives that this company employs made it more worth my while to close this account than to keep it open.
Basically the goal with the 250 word statement is to show a valid reason for closing or disputing an account. In cases like that, the truth is always best.
If you closed the account because you didn’t use the card, say so. If you closed it because the credit card company sold your information to every telemarketer in India (I’m talking to you HSBC Bank – watch out!) then say so.
Always keep in mind though, that what goes on this report is a permanent record. Your permanent record. So choose your words carefully!
Thanks again for your question Matt!
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