Closing Credit Cards Without Credit Score Impact
People always advised not to close old credit cards because credit score may go down. But is it always true?
Yes and No. Sometimes you can safely close your credit cards without any negative impact to your credit scores. But sometimes it may indeed hurt your credit scores.
So, what’s the reason? The reason is called “debt to limit” percentage, which infamous, but not less important to your FICO score.
The debt to limit percentage is determined by summarizing all your credit card balances and all credit limits of all your credit cards and then dividing the total balances by the total credit limits. Unused credit cards with decent size credit limits may help you to keep that percentage lower.
If you close a credit card (or credit cards), you will lose the value of unused credit limit and that may cause your debt to limit percentage to go up. The high percentage will almost certainly cause your credit scores to go down. The negative impact may be significant, that is why the percentage is so important.
Now when we understand why the credit scores may go down after you close credit cards, let’s describe some situations where it is safe to do so.
Closing a credit card with very low credit limit. In this case the impact to your debt to limit percentage is likely going to be minimal or even insignificant. Such cards like secured credit cards, shopping credit cards and gasoline credit cards almost always have low credit limits and can be closed without any score impact.
Closing a credit card with high credit limit. That may lower your credit scores. But if you have several credit cards with high limits and you close one of them, your debt to limit percentage may still be acceptable and the closure appear to be immaterial or cause minimum impact.
Closing a credit card after opening a new one. Consider it as a cleanup, but only if you replace a credit card with one that has a higher credit limit. If the closed card had a higher credit limit than the opened one, then your debt to limit percentage will go up lowering your credit scores.
You have probably heard that closing your old credit card will hurt your credit score because that shortens your credit history. That’s not true. As long as the account is reflected on your credit reports you will always get the value of the age of the card. So, don’t worry about how old the credit card which you are going to close.
Latest Other Card News
Yesterday, on October 28, Uber introduced their new team – Uber Money. According to the official website, it is supposed to work on financial products and technologies to let their customers access, manage, and grow money easier and faster. Uber is expected to develop several new features, as well as make enticing improvements to existing […]
The results of the 2019 Debit Issuer Study, commissioned by PULSE®, a debit/ATM network, and conducted by Oliver Wyman, a global management consulting firm, show that consumer debit use has skyrocketed in the last year and will keep soaring. In 2018, the number of debit transactions increased by 6.7% reaching more than 68 billion. According […]
Some serious changes are in store for many Citi credit cards like the Citi Prestige Card, the Citi Premier Card, the Citi Double Cash Card, the Costco Anywhere Visa Card by Citi, the American Airlines AAdvantage MileUp℠ Card, and some other. The updates imply elimination of some consumer and travel benefits. The bank’s official response […]
Priority Pass is a world-known program offering its members access to over 1200 airport VIP lounges with free food, drinks and entertainment in more than 500 cities across 143 countries. The program is available to everyone who’s paid for membership, regardless of a tickets class.
A virtual credit card is a unique credit card number that is linked to your main credit card account but is different from the physical card number. The virtual credit card number allows to shop online or over the phone without using your physical credit card. The numbers can usually be used once and expire if not used. The cardholders can also delete the numbers if they want or need to.