Check out the impact before you close that credit card

Closing a credit card can have a negative impact on your overall credit picture

Many people use their credit cards for everything from emergencies to eating out to paying their bills. And they soon find themselves in a bind, with ever-increasing balances that make it feel as if there’s no end in sight.

When this becomes the case, some people might think that closing cards can make the delinquency go away. Not only is this not the case, but closing delinquent credit cards will hurt your credit more than it will help it.

When you close a credit card that has a balance, your total available credit is lowered to $0. Since you still have a balance, it appears that you’ve maxed out. This can have a very negative impact on your credit score. In addition you should frequently check your free credit report to make sure there are no errors.

Closing out a card like that will decrease the total credit and increase your credit utilization, which also is not a desired situation. Since part of your credit score consideration includes the different types of credit you have, keeping a credit card in the mix can add points to your score. You could get turned down for credit if a lender thinks you don’t have enough experience with credit cards.

It shortens your credit history to close out old credit cards. Lenders tend to view borrowers with short credit histories as riskier than those with longer histories.

It’s ok to close out a newer credit card that you don’t use anymore since the card does not have a balance and you have other cards.

The correct way to close a card is to send a written notice to the card issuer. You should request written confirmation that the account was closed in good standing.

Be just as selective about the cards you close as you are when you open them. Make sure it’s not going to affect your credit in a negative way.

 

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