August 11, 2022 |8 min read August 11, 2022 |8 min
read There are many reasons you might be considering closing a credit card account. You may be trying to limit your amount of revolving debt. Or you might not be using a particular card any longer. Whatever your goal, one question you might consider: Does closing a credit card hurt your credit score? The answer varies based on your personal
circumstances, but there are things to keep in mind before deciding. Key Takeaways How Does Closing a Credit Card Affect Your Credit Score?Closing your credit card can affect several factors that go into your credit score. Credit Age Credit Utilization You can get your utilization ratio by dividing the total amount of your credit balances by your total credit limits. Then, multiply that number by 100 to calculate your ratio as a percentage. By closing a credit card, you’re decreasing the total amount of credit available to you. And that increases your credit utilization ratio. Here’s one scenario to help explain. Say you have two credit cards:
In this scenario, your credit utilization ratio is 50%, because your total balance across both cards is half the available credit. But by closing card No. 1, your credit utilization ratio would spike to 100%. That’s because you would be left with a $1,000 total balance and $1,000 credit limit. This could negatively impact your credit. According to the Consumer Financial Protection Bureau, experts recommend keeping your credit utilization below 30% of your available credit to avoid a negative impact on your scores. How Much Does Closing a Credit Card Hurt Your Credit?While closing a credit card can affect your credit scores, it’s hard to say by how much. That’s because there are other factors—such as the length of your credit history and whether you have a record of making payments on time—that also play a role in your scores. The actual change to your scores after closing a card will be unique to your individual circumstances. Generally, though, closing a credit card shouldn’t have a major impact on your credit scores—especially if you demonstrate responsible credit use with the accounts you keep open. Choosing to Keep Your Card OpenThere are some important reasons to consider when deciding to keep accounts open:
Although keeping your card open and paying it off could be the right move, it also depends on your unique circumstances. Therefore, before deciding to close an account, it’s important to look at the pros and cons of your situation and determine whether there may be any negative impact on your credit. If your circumstances determine that closing the account is best, there are ways to help minimize the impact on your credit scores. Ways to Safely Close Your Credit CardClosing a credit card may seem simple enough. But before you break out the scissors to snip your card in two, here are some things to consider:
If you still have questions about closing your account, check your cardholder agreement for more details. Alternatives to Closing Your CardBefore you make the decision to close your credit card account, other options could be worth considering:
Closing a Credit Card In a NutshellThe decision to close your credit card account is a personal one. One way to help make a more informed choice is to routinely monitor your credit scores. CreditWise from Capital One is a free tool that allows you to monitor your VantageScore® 3.0 credit score. Using CreditWise to keep an eye on your credit won’t hurt your scores. And it’s free for everyone, not just Capital One customers. It even has a tool called the CreditWise Simulator. It can help you understand how choices you make could affect your scores. That includes things such as canceling your oldest credit card and paying down your balance. We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners. Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models. It may not be the same model your lender uses, but it can be one accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Some monitoring and alerts may not be available to you if the information you enter at enrollment does not match the information in your credit file at (or you do not have a file at) one or more consumer reporting agencies. The CreditWise Simulator provides an estimate of your score change and does not guarantee how your score may change. August 11, 2022 |8 min read Related Contentarticle | August 16, 2022 | 9 min read article | June 28, 2022 | 7 min read
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