Closing credit card affects credit score or does it
Does closing a credit card negatively affect credit score? Not really or rather the fact that you close credit card does not affect your FICO scores on itself, but here are two important points to know,
1. Closing a credit card will only lower FICO credit score if the debt utilization ratio will go up because of that. If you have three credit cards, carry significant balances on the two and want to close the third one, it will raise the utilization ratio. So if you want to cancel a credit card, see how it will affect this ratio. Once it jumps over 35%, you may see lower credit score.
2. Long-term and this is very long term, when you cancel a credit card in good standing with a $0 balance, it will generally fall of your credit reports after 10 to12 years. At that point, you lose the account credit history and average age of your credit report decreases which may lower your FICO scores. So if you have only a few credit records including a long time ago opened credit card, think hard before closing such. I know a few people in their mid 30s now, who still keep the very first student credit card obtained in college. Besides that, they have may be another credit card, student loan, mortgage and car loan. So they cling to those 15-year old credit cards and would never even think to cancel.
Thu Dec 16, 2010 01:12PM | Copyright: www.bad-credit-advisor.com | More in Credit Repair Tips | Comments (0)
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