Close Your Card Without Killing Your Credit Score
By: Brian O'Connell

If you’re mad as hell at your credit card provider, and don’t want to take it anymore, closing your account might not be the credit score killer that the experts have said. In fact, FICO’s scoring model indicates that canceling your plastic isn’t such a big deal.

But doesn’t that go against the conventional wisdom? For years, the consensus among credit card gurus was that shutting down your plastic would adversely impact your credit score. By closing down what’s usually a pretty big pool of available credit, the thinking goes, you give credit scoring agencies less to go by, and that can drive your score downward.

But a new school of thought says closing out a credit card won't ruin your all-important score. In fact, it may not even matter at all.

For starters, closing out a credit card won’t wipe your card activity from your credit rating file. Typically, credit scoring agencies hold on to your credit card history for 10 years after a card has been shut down.

Plus, the history you have accumulated through your credit card still means a lot to credit scoring agencies. What matters to them, straight from the FICO Web site, includes:

  • Payment history = 35% of your score
  • Amounts owed = 30%
  • Length of credit history = 15%
  • New credit and types of credit = 10%

All of these factors are represented in your credit card account, and thus remain big factors to creditors even after you close a credit card.

It does, however, help if you have a good track record. If you’ve paid your bills on time, kept your loan balances now and demonstrated that you’re a good credit risk, shutting down an unwanted or unnecessary credit card shouldn’t damage your score.

Conversely, if you have high balances on your credit report and have a history of making late payments, closing a card could be a sign to creditors that you can’t handle too much debt, and thus deserve a lower credit score.

To prevent even a hint of a short-term, downward credit score, play it safe and don’t close a credit card out if you’re about to buy a big-ticket item, like a new house or car. If there is any danger of hurting your credit score via a card closeout, it’s in the short-term and not over the long haul.

Theoretically, closing a card shouldn’t matter before you hunt for a new mortgage, but why take a chance? You can always take the scissors to your plastic after you close on your new digs.

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