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
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.
Credit scores and credit reports have become an integrate part of our lives and financial health. There are a lot of services that allow to check credit reports online and FreeCreditReport.com is one of them. FreeCreditReport.com is owned and operated by Experian, one of the three major credit bureaus in the U.S. The service provides […]
If your wallet is bulging with store loyalty cards, there’s good news for you from Samsung Pay. The most widely accepted mobile digital wallet system in the United States is now allowing users to upload their store membership and rewards cards onto their Samsung Galaxy smartphones.
Identity theft and banking fraud concern more and more Americans, according to a recent FICO survey. And that is not a surprise as credit card fraud continues to grow, especially online fraud.
There is no foolproof way to protect yourself from fraud, but there are a few things you can do. The first and foremost thing you should do is never ever give your credit or debit card information to someone you do not know.