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Credit Score News, Tips & Advice « Credit Scores > Credit Score Tips > Closing credit cards does not do you and your credit score any good

Closing credit cards does not do you and your credit score any good

By Brian Anderson
Published: Thursday, October 8th, 2009

Closing your credit card does not make your delinquencies go away. This is what most credit card holders refuse to learn. In fact, closing your credit card because of late overdue payments hurts your credit score. When you close your accounts, a record will be made on your credit report. The creditors will figure that this is the most you can do to escape credit obligations. 

So to be safer than sorry, here are five credit cards you should not close no matter what. One of the credit score tips you should learn is to face your responsibilities even if it takes forever to get on track them. Another one of those helpful credit score tips would tell you that closing credits does not increase your credit score, will not erase your delinquent records, nor will it exclude your credit history from credit score calculations. 

If you choose a credit card to close, make sure that they are neither of the following.

Credit card with balance

If you still have remaining balance on a credit card, the moment you close it, the available credit drops to $0. With the current balance on zero credit limit, your credit card would look like it’s maxed out. The amount of credit you have accounts for 30% of your credit score. If you look at it, a maxed out credit card would definitely do your credit score damage. 

Your only credit card

Remember that credit cards are useful if you know how to use them right. There is truth to one of the credit score tips that advices you to choose installment credit over revolving ones. But that only applies if you have difficulties paying debts. But if you do have a credit card and there seems to be no problems on keeping up with payments, there’s no reason for you to close it. In fact, if you are a very good payer and you have both installment and revolving types of credit, you can expect higher credit score. 

On the other hand, if you close your only existing credit card, you could have difficulties applying for one in the future. The creditors will think that you lack experience in handling credit card bills. 

Credit card with available credit

When you close a credit card that still has available credit on it, you increase your debt to credit ratio. You don’t want this happening because the higher your credit utilization is, the lower your credit score becomes. 

Your oldest credit card

Another thing that goes into your credit report is the length of time you’ve been using your credit card. This is the same as your credit history. You may not be able to fool FICO into giving you higher credit score, but there are numerous credit score tips you can follow that will increase your credit score. One of them is to keep your oldest credit card accounts open since the longer credit history you have, the more attractive you would be to lenders and creditors. 

When you close one of your oldest credit cards, your credit score would not change instantly. But after some time, your credit score will have its tremendous drop. 

Credit card with the best terms

Another one of those credit score tips that make a lot of sense is to not make a mistake closing a credit card that has the best terms. There is no point in closing one that has low interest rate, no annual fee and other perks. This should be the last card you would consider closing. If you do close it, it you are losing all the good things it offers.

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