Does it help your credit, hurt your credit or make no impact,?

Question

I've always heard that by cancelling some credit cards, ones that you don't use, that it helps your credit score. Is it really true?

Answer 1

You will see your score drop 15-20 points when you close a card.  It's best to not close any cards and just leave them open, store card for an example.  Bank issued credit card, it would be best to make a small purchase and pay it off right away to show activity if you haven't used it in a while.  Bottom line, do not close any credit cards, it will lower your score but you will regain the points after a couple of months.

Answer 2

There are two ways it can hurt your credit score.

First, it will likely increase the ratio of your total debt to your total credit limits.  You should always be below 30% on this key ratio.  For example, with total credit limits of $10,000, you should not have more than $3,000 in outstanding credit card debt.

Ideally, this ratio should be even lower, at 10% or less, for the highest possible credit score.

Also, if you close an older account (one that has been opened for a longer period of time) that will hurt your credit score.  It is best, if you close an account, to close a newer one.

That said, you should not keep so many credit card accounts open that you become an easier target for identity theft.  If you need to close an account, check your debt to credit limit ratio first, and be sure to close newer accounts rather than older accounts.

Answer 3

It depends on how much credit (potential debt) you already have and how much debt you have.

If you have a lot of credit, or a lot of debt it can hurt your score.  Reducing the amount that you can potentially borrow can increase your score.  Cancelling a card will erase the history of the card, this may lower your score.

In the end I would cancel it and not worry about the dumb score.

Answer 4

Yes, and here's why:

1. Payment history- 35%

2. Total debt owed to available credit ratio-30%

3. Length of time establishing credit-15%

4. Types of credit established-10%

5. Inquiries and New accounts-10%

Closing an account can affect all of these factors, one way or another. It limits the overall, combined payment history of all accounts, which is the most important overall because that counts for more than a ⅓ of your score.

Another important factor is the credit line that will be lost when an account is closed. The 2nd most important factor is the ratio of credit used to credit you're able to use. It's relatively simple, the more available credit, the less debt you owe, the better your score. I'll give an example. If I started with 4 credit cards (1-$500,1-$1000, 2-$2000) that totalled $5500. Let's say that I owed $1,650, which is about 30% of the total limit between all 4 cards, and I happen to close one of the $2000 cards, since it had a 0 balance and I wasn't using it, instead now I owe that same $1,650 between 3 cards with a limit of $3,500 which would be 47% or close to ½ the available credit, which would make my score lower.

Also, depending on how long you've had your credit cards, that too can play a factor. By cancelling an older card, it shortens the average age of accounts, giving the appearance that credit has been established more recently than it has, which potential lenders may mistake as inexperience with credit.

Also, other factors to keep in mind is that depending on the number of credit cards you have, it can disrupt the ratio of revolving accounts (credit cards) to installment accounts(loans)

Answer 5

no! you need to have credit cards to keep good credit just use them everyone in a while and pay them off asap!

its the credit to debt racio (sic) that helps or hurts your credit

Answer 6

it helps if you cancel newer accounts or accounts with any delinquent charges. hang on to older credit accounts, especially those with good record. Also, make it a point to keep the usage of each card under 50%, under 30% even better. It can help to open new accounts to spread the total debt out so that each card is under 30%.

Answer 7

It depends on how long you had that credit card. The credit score is also based on time you had that credit card so cancelling you old credit cards will cause your credit score to drop. The other factor is available credit and how much you charged. You should keep all your credit cards and charge them occasionaly to keep them active. I would not advice to cancel them just don't use them. Keep checking your credit file and FICO every three months.