Closing Old Credit Card Accounts Won’t Boost Your Score—But This Will | Global News Avenue

Although closing a credit card may seem As smart a move as it is, it can actually hurt your credit score in a number of ways, such as increasing your credit utilization ratio.

If you’re looking for a quick and easy credit score boost, consider increasing your credit limit instead of closing your credit card. Credit limit increases are simple requests, they give you more spending power, and depending on your spending habits, you can often see a significant improvement in your credit score.

How closing a credit card affects your credit score

Closing a credit card account can cut into your overall available credit, lower your average account age, and weaken your credit portfolio. All three of these things can hurt your credit score.

credit utilization ratio

credit utilization Refers to the total amount of credit you have available on revolving accounts (such as credit cards and lines of credit), and is an important factor in most credit score formulas. For example, if you use $500 of your total credit limit of $1,000, your utilization rate is 50%.

The lower your credit utilization ratio, the better your credit score is. Therefore, closing the card (and therefore losing some available credit) may cause your score to drop. The drop can be significant, depending on the card’s credit limit and how much you spend.

Average age of accounts

Credit scores also take into account the average age of your credit accounts (among other age details). This is a bit Secondary scoring factorsbut the older the better.

Removing credit card accounts from this equation, especially ones you’ve had open for a while, can hurt this average. Fortunately, you won’t feel the sting for a while. Accounts in good standing will remain on your credit report for 10 years after they are closed.

credit portfolio

credit portfolio Refers to the variety of credit accounts opened in your name. Most scoring formulas want to see you successfully manage recurring accounts and installment account (such as car loans and student loans).

If you close your credit card and don’t open any other revolving accounts, it could lower your credit score. However, the impact should not be too serious. This is another relatively minor scoring factor.

Increasing your credit limit can improve your credit score

Looking for a quick way Improve your credit score? Closing credit cards is unlikely to help. instead, Request a credit limit increase This can be done. All things being equal, more available credit should lower your credit utilization ratio and potentially improve your credit score.

If you want to close one card (perhaps because of the annual fee), it might be worth applying for the increased fee on another card you keep open. This way, your available credit won’t be affected too much.

You can usually request a credit limit increase through your card issuer’s mobile app or online portal. Or, call the number on the back of your credit card to speak directly to a representative. There’s no guarantee you’ll get an increase, but if you’re a reliable cardholder and your finances are in good shape, it’s possible.

Use credit cards responsibly to maintain good credit

If you’re going to use credit cards, using them responsibly is key to good credit health. Avoid monthly balances, always Make your payments on time and evaluate the situation thoroughly before closing your account

New to credit or still perfecting your cardholder knowledge? review Credit card basics Before you swipe.