Closing old credit card accounts is another credit blunder that has the potential to lower you scores.
Now that we've debunked the myth, here's the real reason why
closing that old credit card account might hurt your scores: Credit scoring models consider the relationship between the balances and the credit limits on your credit card accounts.
Closing an old credit card can make your credit history seem shorter than it actually is, lowering your credit score slightly.
You may hear that
closing an old credit card will drop your credit score — that's a myth.
Read full pros and cons of
closing old credit card accounts in the Should I Cancel Old Cards?
Length of credit history:
Closing an old credit card can definitely decrease the average age of your credit history, too — especially if the card you're closing was established a long time ago, or maybe even your first - ever credit card.
Because of this,
closing an old credit card that you no longer use can cause your score to drop, as it reduces the amount of available (unused) credit you have.
Once you've switched your balance to a new card, you may debate the possibility of
closing your old credit card accounts.
If you've ever wondered whether you should
close that old credit card account or apply for a business loan and a mortgage at the same time, then understanding these factors should help.
Lastly, do not
close your old credit card account as this will lower your overall available credit which will in turn increase your credit utilization.
By
closing the oldest credit card account, you are essentially erasing part of your credit history which can drop your credit score.
Closing an older credit card account may actually lower your credit scores.
As well if
you close old credit cards you are wiping out history that can be vital to showing your history.
Once
a you close an old credit card account your credit history will appear shorter.
# 5 Do not
close your old credit card accounts.
That is why the worst thing you can do is to
close an old credit card that you don't use much.
To maximize your credit score, don't
close that old credit card account — even if you've achieved a zero balance — unless you're being charged an annual fee.
If
you close an older credit card account, your credit history suddenly looks shorter, and that can drag on your credit score.
I didn't realize how bad it was to
close old credit card accounts, until we started to apply for a loan and I closed several cards out, thinking it would help.
Despite what you have heard, it is not wise to
close old credit card accounts and paying off all debts does not mean you'll have a perfect credit score.
CreditKarma has a Credit Score Simulator that should be able to answer this, but it just says that
closing your oldest credit card account will likely decrease your credit score without putting a number on it.
The myth is that when
you close an old credit card account, you will lose the benefit of the age of the account.
Jeremy M. Simon: Why
closing your oldest credit card may be a bad idea — Considering closing an old card and getting a newer, cheaper one?
You might be tempted to cut up and
close your old credit cards once you transfer a balance, but you're better off keeping them open.
Don't
close old credit card accounts, even ones you're not using.
Not exact matches
The reality is that
closing your
oldest card won't affect your
credit any more than another
card in your arsenal.
Speaking of not
closing old cards, another tool to raise your
credit score in 30 days is to make sure your
cards aren't
closed due to inactivity.
So if you
close an
old / unused
card, you also eliminate some of your available
credit.
For example, if you have a total
credit limit of $ 4,000 and two
credit cards, and you have a balance of $, 1000 on one
card and $ 0 on the other, you might think about
closing the
old card which you are not using.
In fact, it is a good idea to
close all but the
oldest credit card account that you have once your consolidation is complete, and cut the rest up and toss them out.
Therefore, even if your
old credit cards have horrible interest rates,
closing those
cards will decrease the average length of time you've had
credit.
Closing an
old account, adding a couple
credit cards and shopping around for a mortgage are, in aggregate, less detrimental than making a few late payments.
After an excellent balance transfer deal or a nice sign - up bonus for a new rewards
credit card, then consider
closing an
old card.
Also, if you aren't
closing your
old cards, it does positively impact your debt to available
credit ratio.
Additionally,
closing all of your
old credit card accounts can ding your
credit score.
The length of time you've had
credit: Longer is better, so keep
old accounts open unless there is a compelling reason to
close them, such as an annual fee on a
card you no longer use.
The
credit companies like Experian and Equifax only report what's given to them, so it's easy for them to add new accounts but they won't remove anything unless you ask (which is why you can see
old closed credit card, student loans, etc on your
credit report).
It depends on your own personal circumstances, but long - standing accounts with good histories can be beneficial to your score — and
closing an
old card can actually reduce your available
credit... which in turn increases the share of available
credit used and thus potentially harming your score.
So if you
close an
old / unused
card, you also eliminate some of your available
credit.
So, by
closing an
old or unused
card, you are essentially wiping away some of your available
credit and there by increasing your
credit utilization ratio.
Now, if you decide to
close credit card 2 because it's an
old card that you never use, your
credit utilization ratio looks like this:
If you are thinking of
closing out an
old credit card account that you don't use?
When the first late payment on the
closed card reaches the 7 - year -
old mark, that account will be removed from your
credit report entirely.
Note that if you transferred over your
credit line to a different
card when
closing, you won't be able to get the
old account reinstated.
Never
close unused or
old credit card accounts.
Some
credit card issuers will allow you to reopen the
old credit card account upon request soon after it was
closed.
Closing a credit card account is usually not a good idea; having less available credit can negatively impact your credit score, and closing old accounts will shorten your credit h
Closing a
credit card account is usually not a good idea; having less available
credit can negatively impact your
credit score, and
closing old accounts will shorten your credit h
closing old accounts will shorten your
credit history.
Closing old cards negatively affects your average
credit length, which is a major factor in your scores.»
That's also a good reason not to
close or cancel your
old credit card...
to those worried about getting accounts
closed: move your
credit lines around so that your
oldest card (or the ones you want to keep) is (are) your highest
credit line (s).