Cancelling Credit Cards – When You Should and Shouldn’t
Generally speaking, I recommend clients keep unused credit cards open so they can benefit from having a large amount of available credit. This also shows they are only using a small portion of their credit limit. There are exceptions, to this rule.
Here is what you should know before you make a decision:
- You might want to close unused credit cards if it has an abundance of fees.
- Consider closing an account that has active fees, if it will prevent you from using it and racking up more debt.
- Always keep some accounts open allowing your credit utilization (the ratio of your credit card debt to your total credit card limits) to be lower. Always aim to keep your overall credit utilization below 30%, it typically shows lenders that you’re using credit, but not dependent on it.
- Don’t close the oldest credit card account on your credit report. This card often serves as a marker and shows the longevity for your credit history.
- If you want to close credit card accounts, don’t close multiple accounts at once. It can come across suspicious to creditors.
- Always check your credit reports for updates and errors after you close an account. While the closed account and payment history may stay on your reports for seven or more years, the status should be updated to reflect that they are closed.
If you want more information about closing an account or want to review your credit report, give me a call or email me today.