Homedirect loanIs closing a credit card damaging your credit score?

Is closing a credit card damaging your credit score?

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Carrying a credit card, you no longer want may seem like a waste of space in your wallet. Closing credit cards might be challenging for you even if you don’t use them anymore or for any other reason. It can easily affect your credit score but do not worry about your credit cards. It does not mean that you have to carry all your cards for a lifetime. 

Sometimes people want to close their credit cards to avoid the annual fee, or maybe your credit card does not have rewards that match your lifestyle due to less credit limit. Always make sure that before you close a credit card account, a few things you should learn about canceling a credit card can hurt your credit score for future references. Let’s check out the below points.

Your credit utilization goes up. 

After closing a credit card, the credit limit is no longer on your credit score. Due to this, your credit utilization ratio can go up immediately, and your credit card utilization depends on the overall credit limit on your card and how much you are using your cards. It is all based on a per-credit. If you lose some credit limit but carry the same amount of debt, your ratio will go up quickly because utilization makes up more than 30% of your score, and it is an essential factor to watch. 

Impact on credit age

Your credit age might be going down, and your account would include a closed impact in your credit report for up to 8-10 years, so it might take a while to affect you. Also, it will drop off your credit report because it is no longer active. Suppose you are going to close your previous account, then your credit card score could be dropped ten years from now when that account falls off your credit report. You should always consider accounts with the shortest credit age when approaching a credit card account. 

If you do not have multiple credit cards or loans, it could leave you with a narrow credit file, meaning that there’s not enough information for a creditor to evaluate. 

Your credit mix may be the effect.

The credit mix is 10% of your score. Demonstrating that you can handle several credit types helps boost your credit score, and if you close your only credit card, it can make you look less experienced. It is not about who completed your credit card, you, or the card issuer. The impact on your credit score is the same. 

Conclusion If you want to cancel your credit card at a high-interest rate, transfer the balance to another one. Also, you can pay off the balance at a lower rate. Always active your old credit card by making a small purchase each month and then paying it off in full you can put your credit card away or cut it up until you finish paying off debt on your credit card.

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