Financial Freedom

Does Closing a Credit Card Account Affect Your Credit Score

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Boosting your credit rating can be a challenging task. Since financial extremists and the majority of blogs label all loans and credit cards as wicked, you may get tempted to shut down all your credit cards for the sake of improving your score. It isn’t as cut and dry as you may imagine, and you may end up harming your ratings by choosing to shut down any of your accounts. 

Does closing out a credit card account after your credit score? Read here to find out the answer and what you should do.

What happens to your credit score when you close your account?

Credit cards affect an individual’s credit in various ways. For an extended period, your credit rating is partly decided by the age of all of the current credit profiles that you own. So, if you analyze all of the credit cards listed on your credit record, you can equate how long each account has been active.

The older the account, the greater the score is in this section.15% of your ratings rely on the age of your accounts. This is a comfortable section to score well in since it does not depend on any other financial choices you make. Make sure to take the time to collect a solid credit background.

As a result, when you dismiss a credit card, you limit the number of accounts employed in calculating the credit score. However, closing an account doesn’t happen instantly and the account ages for a decade after it’s been shut down. Then it eventually drops off your credit records once the period ends. Also, remember that you may find a site to profit from if you have a good credit history.

Another way your score is affected by closing your card is through your credit usage ratio. For instance, if you owe $4,000 on a credit card and own three distinct cards with loan limits equaling $20,000, this means your credit usage ratio is 20%. However, if you close one of the accounts that possess a $6,000 credit limit, you reduce your overall credit down to $14,000.

If you redo the math, the utilization rate shoots up to 28.5%. Owning a more extensive credit usage affects your score and also sends warning signals to financial institutions about your remaining credit balance.

How many credit cards should one own?

The number of cards you own depends on how you manage the accounts. Maintain low or zero balances on your cards individually matched to your overall limits and revenue. If you take this into consideration, owning several cards should not strain your credit or the possibility of getting a mortgage or loan.

Owning numerous cards decreases your credit usage ratio since there is more credit at your disposal. This is only good for your credit ratings if you do not charge up the cards too often. Nonetheless, if you open numerous accounts in a short period, your score is highly likely to decrease. 

Bear in mind that fresh credit accounts for 10% of the credit score. It is also not a good idea to overload the number of credit cards in your possession, particularly when you have zero installment loans. Another 10% depends on this.

With close to 35% of your credit ratings impacted by how you utilize your accounts, there is room for growth regardless of your current score. Before you make any decisions concerning credit cards, have in mind the impact your decisions can have on your account.


  1. Shara January 8, 2020
    • Sharing Life's Moments January 8, 2020

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