The short answer is that it depends on which credit card you close. As long as you don’t close your credit cards with the highest credit limits or the ones you’ve had the longest, your credit score shouldn’t be impacted.
Here’s the full explanation. Your credit score is comprised of 5 factors:
- Your Payment History shows all your payments on past loans, and whether they were late or ... (35%)
- Total Amount Owed (30%)
- Length of Your Credit History is the part of your Credit Report that records your history of borrowi... (15%)
- Types of Credit (10%)
- New Credit (10%)
When you close a credit card, it can affect numbers (2) and (3).
The first way closing a credit card can affect your credit score is by increasing your Total Amount Owed (#2).
If you have two credit cards with limits of $5,000, where your Your balance is how much you still owe your credit card provider for things you've charged... is $2,500, and one credit card with a limit of $10,000 and no balance, your “credit utilization ratio” is only $5,000 out of $20,000, or 25%. That’s pretty good.
But, if you close the credit card with the high limit and no balance, all of the sudden your credit utilization ratio doubles to $5,000 out of $10,000, or 50%. That’s much worse and could lower your credit score.
The other way closing a credit card can affect your credit score is by lowering your Length of Credit History (#3).
This is pretty similar. If you’ve had two cards for 1 year each, and one card for 4 years, your average is 2 years (1+1+4 = 6, divided by 3 =2).
But, if you close the credit card you’ve had for 4 years, now your average is only 1 year. That’s much worse and it could lower your credit score.
So, if you keep your credit cards with the highest credit limits and that you’ve had the longest, closing a credit card shouldn’t negatively impact your credit score.
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