Closing a credit card account
You don’t think closing a credit card account is easier than being president? Well, it is, and we just made it easier.
The wisdom or mistake of closing a credit card account
Like lunges to a butt, a good credit score is important to your finances. It could mean getting or not getting what you want. But simply closing a credit card account can affect your credit score for better or worse, like saying “I do” or “I don’t.” Of course, if you don’t want to go it alone there’s always a pro and this pro knows.
What’s to know when shutting down a credit card account?
The 1-2-3s of closing a credit card account
There are several factors that make up how the three big credit agencies calculate your credit score. But, all factors aren’t equal and size does matter. When it comes to closing an account, bigger is better.
What’s to know? Here you go.
1. Credit history
Your credit history makes up about 15% of your credit score. In this case, we’re looking at length. Creditors like it long; they like to see your experience in using credit, even if that’s you using it rarely. They prefer five years to one. So, when shutting down credit cards, keep your oldest one or two, and a history of five years or more means more. Every year, like every inch, counts.
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2. Credit utilization
Credit utilization makes up about 30% of your credit score and means more than credit history. What’s the meaning of such a fancy word?
Credit utilization is the percent of your available credit you’re actually using. For example, if you have a credit limit of $5,000 and a balance of $2,500, you have a credit utilization of 50%. Keeping this number down below 40% is key to getting your score up. Creditors don’t want to see you maxing out your credit and neither do we. Closing a credit card account lowers your available credit.
So, don’t close credit cards if it takes your credit utilization above 40%. Pay off credit cards first.
3. Payment history
Payment history is the largest portion of your score at 35%. We all like getting paid on time, especially banks and businesses. It’s critical that you pay all your bills on time and in full. If you have one card with lots of regular payments and one with none, which one you should you keep? Keep the card or cards with regular payment histories.
Closing down your credit cards isn’t rocket science, but keep these three factors in mind. If you want help, you’ve got it here.
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