How to Close a Credit Card without harming your credit

If you’re considering closing a credit card, there are a few things you need to know first. Here’s how to close a credit card without harming your credit score.

Checkout this video:

Reasons for wanting to close a credit card

There are many reasons why people want to close a credit card. Some people want to close a credit card because they have too many credit cards and want to simplify their finances. Other people want to close a credit card because they are trying to improve their credit score. And still others want to close a credit card because they no longer use the card and it is costing them money in annual fees. Whatever the reason, there are a few things to consider before closing a credit card.

You have too many credit cards

One reason you might want to close a credit card is that you have too many of them. Although having multiple credit cards can help your credit score in some cases, having too many can actually backfire. Each time you apply for a new credit card, the issuer will do a hard pull on your credit report, which can temporarily lower your score by a few points. So, if you’ve been opening a lot of new cards lately, it might make sense to close some of them to help improve your score. Additionally, carrying too many cards can be cumbersome and make it more difficult to keep track of your spending. If you find that you’re not using several of your cards regularly, closing them could help simplify your finances.

You’re trying to avoid temptation

If you have a hard time not overspending or you know that you’re going to be facing a lot of temptation in the near future, it may be a good idea to close your credit card. This way, you won’t have the means to spend more money than you can afford. If you’re trying to get out of debt, this can be an especially effective strategy, as it will help you break the habit of using credit to make purchases.

You’re trying to simplify your finances

One common reason people choose to close a credit card is to simplify their finances. When you have too many cards, it can be difficult to keep track of them all. This can lead to missed payments,Late fees, and interest charges. If you’re trying to simplify your finances, closing a credit card may be a good option for you.

How closing a credit card can affect your credit

It’s important to know how closing a credit card can affect your credit score. Depending on your circumstances, it could either help or hurt your credit score. If you’re trying to improve your credit score, you might want to keep your credit cards open. But if you’re trying to get rid of debt, you might want to close your credit cards.

It could lower your credit score

The decision to close a credit card shouldn’t be taken lightly. After all, closing a credit card account is more than just cutting up your plastic and saying goodbye to your issuer. It can also have an impact on your credit score.

When you close a credit card account, it can lower your credit score in several ways. First, it can reduce your credit utilization ratio, which is the amount of debt you have compared to your available credit. A lower credit utilization ratio can be a good thing, but if it’s too low it could signal to lenders that you’re not using your credit cards regularly.

Second, closing a credit card account can shorten your average credit history, which is one of the factors that make up your score. The longer your history is, the better it is for your score. So, if you close an account that you’ve had for a long time, it could have a negative impact on your score.

Lastly, closing an account could also cause you to lose any positive payment history you have with that account. This could hurt your score in two ways: by reducing the length of your positive payment history and by increasing the amount of new derogatory information on your report.

For all these reasons, it’s important to think carefully before you close any credit card accounts. If you’re not sure whether or not it’s the right decision for you, consider speaking with a financial advisor or another expert before making any final decisions.

It could increase your credit utilization ratio

If you’re carrying a balance on your credit cards, closing a credit card could increase your credit utilization ratio, which is the amount of debt you have compared to your total credit limit. A high credit utilization ratio can hurt your credit scores because it signals to creditors that you’re maxing out your available credit, which could make them hesitant to lend to you in the future.

It could affect your credit history

When you close a credit card, you’re effectively losing the history associated with that account. That includes not only the length of your history with the account, but also your payment history and credit utilization. That’s why closing a credit card can tank your score in the short term.

Your credit score is composed of five factors, and closing a credit card could negatively affect two of those:
-Payment history (35%): A closed account means you’ve lost the positive payment history associated with that card. If it was an older account, that could shorten the length of your credit history, which makes up 15% of your score.
-Credit utilization (30%): This is the amount of debt you have relative to your credit limits. When you close an account, you lose the available credit associated with that card, which could increase your utilization rate and hurt your score.

In addition to those two key factors, closing an account could also affect your account mix (10%) and inquiries (10%).

How to close a credit card without harming your credit

It’s important to know how to properly close a credit card, especially if you’re trying to improve your credit score. If you close a credit card without taking the proper steps, it could damage your credit score. However, if you follow the steps in this article, you can close your credit card without harming your credit.

Pay off your balance in full

Paying off your balance in full is the best way to close a credit card without harming your credit. By doing so, you avoid paying interest and improve your credit utilization ratio, which is the percentage of your available credit that you’re using.

If you can’t pay off your balance in full, try to at least make a large payment before closing the card. This will help reduce your outstanding debt and improve your credit utilization ratio.

It’s also important to keep in mind that closing a credit card can negatively impact your credit score in other ways. For example, it can shorten your credit history, which is considered one of the key factors in determining your score. Therefore, if you’re considering closing a credit card, be sure to weigh all the pros and cons before making a decision.

Keep the account open for a year or two

If you recently opened the credit card and are satisfied with its terms, you may want to consider keeping the account open for at least a year or two. This will help to establish a positive credit history with the account, which can boost your credit score in the long run. Furthermore, closing an account can sometimes result in a penalty fee, so it may be beneficial to keep the account open and avoid this charge.

Consider closing unused cards with high annual fees

If you have any credit cards with high annual fees and you don’t use them often, consider closing them. annual fees can add up, and there’s no point in keeping a card you don’t use. When you close a credit card, your credit utilization ratio may go up, but as long as you keep using credit responsibly, your score should rebound within a few months.

Call your issuer to close the account

When you close a credit card, you’re essentially taking away one of your lines of credit, which can ding your credit score. That’s because one factor in your credit score is called “credit utilization,” which is the amount of credit you’re using compared to how much you have available.

If you close a credit card with a $5,000 limit, for example, and you have a balance of $2,500, then your credit utilization is 50%. But if you close that same card, your credit utilization on the remaining cards jumps to 67.5% ($2,500/$3,750). And that could hurt your score.

Closing a card can also affect the length of your credit history. A longer history is better for your score because it shows lenders you’re a responsible borrower. So if you’re thinking about closing an old account that you no longer use, think twice — it could be helping your score more than you realize.

Check your credit report for errors

One of the most important things you can do before you close a credit card is to check your credit report for errors. According to a study by the Federal Trade Commission, one in five consumers has an error on their credit report.

If you find an error on your credit report, you should dispute it with the credit bureau. You can do this online, and it should only take a few minutes. Once you dispute an error, the credit bureau has 30 days to investigate and remove any incorrect information.

If you have a good relationship with your credit card issuer, you may be able to negotiate a lower interest rate or annual fee before you close your account. If you have a balance on your card, this could help you save money on interest charges.

Before you close your account, be sure to pay off your balance in full. If you have a balance remaining when you close your account, it will damage your credit score.

It’s also important to cancel any automatic payments or subscriptions that are charged to your credit card. You don’t want to accidentally keep paying for something after you’ve closed your account.

Once you’ve taken care of all of these things, you’re ready to close your credit card account. You can usually do this by logging into your account online and clicking on the “close account” button.