Many consumers close credit cards after becoming what seems like too delinquent to catch up. There seems to be the notion that closing cards makes delinquency go away. Not only is this not the case, closing out a delinquent credit card will hurt your credit more than it will help.
Here are five credit cards that you should never close.
- Any credit card that still has a balance.
When you close a credit card that has a balance, your total available credit is lowered to $0. Since you still have a balance on that credit card with no credit limit, it looks like you’ve maxed out. The amount of debt you have is 30% of your credit score; so a maxed out credit card, or one that appears to be maxed out, can have a very negative impact on your credit score. - Your only credit card with available credit.
Closing out this card will decrease total available credit and increase your credit utilization, which, as before, is not a desired situation. - Your only credit card.
Since part of your credit score into consideration the different types of credit you have, keeping a credit card in the mix will add points to your credit score. You could get turned down for a credit card in the future because the creditor thinks you don’t have enough experience with credit cards. - Your oldest credit card account.
Closing out your old credit cards shortens your credit history. Lenders tend to view borrowers with short credit histories as riskier than borrowers with longer histories. Closing your oldest credit card won't impact your credit score immediately. But, once the credit card falls off your credit report 10 years down the road, you might see an unexpected credit score drop. - The credit card with the best terms.
Why let a good thing go? If you have a credit card that has a low interest rate, no annual fee, and other perks like travel insurance, keep it. A credit card that charges you less for making purchases is far better than one that charges you more.
2 comments
theveteransbenefit.org
February 3, 2010 at 12:29 am (UTC 0)
hi.. thanks for in fo about 5 Credit Cards You Should Never Close.
i'm very very thanks.. so i know about credit card
a funding consultant
February 9, 2010 at 8:44 am (UTC 0)
Thanks for taking the time to discuss this, I feel strongly about it and love reading more on this topic. If possible, as you gain knowledge, would you mind updating your blog with extra information? It is extremely useful for me.