Does Canceling Credit Cards Affect Your Credit Score?
There might be several reasons to close your credit card account, be it annual fees or unmanageable debt. But should you consider closing your card account if it hurts your credit score just by closing the account itself?
Canceling credit cards might not be a good option at times. There are ways in which an individual can consider not closing his/her credit card account to avoid a dip in their credit score. From here, the question arises of how closing a credit card account will affect your credit score. So let’s get started.
Credit Utilization Ratio
Closing a credit card account will drop your total available credit and will have an immediate effect on your Credit Score. Since your card limit is no longer able to lend a hand in your Credit available to credit availed ratio, your total utilization rate will increase.
Credit History
if your Credit account’s age is more than regular, it will have an impact too. Better your credit payment history, the more you are considered for a credit facility. People with longer credit-paying history have a good record of repaying their loans and credit facilities on time. Thus, it assists in getting credit facilities easily. Closing an old credit account will strike out all the repayments made from that account having an impact on your Credit score
What to consider instead of closing your account?
If you are closing your credit card account because of a high annual fee, this problem can be sorted out by contacting your Credit card company and asking for an annual fee waiver or a discount on the same. Some companies can give such offers in order to retain their customers.
If you are trying to upgrade to a new card, follow all the steps regarding closing off the old card’s account. Since getting a new card prior will balance your credit score in no time, make sure to redeem all your bonus points and repay any remaining debts on the same card.
If you have issues managing a lot of credit cards, use credit card management apps and they’ll assist you in managing all your cards and using them effectively and efficiently.
There are cases where people rarely use their credit cards. This brings on a heavy annual fee of no reason. Instead of canceling your Credit Card, try to use your cards on online shopping or getting subscriptions of different platforms. Certain cards give offers on different websites, check with your card if there are any offers available at the moment and redeem them claiming extra benefits without paying anything.
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