| If you're thinking about closing a credit card account | | | | If you only have one card it would not be a good idea |
| that you aren't using or have more than one, you may | | | | either, since you may need that credit card account |
| have wondered if it's a good idea to do it. Some | | | | for emergencies. Especially if you don't have an |
| people think it will raise their credit score. | | | | emergency fund. Experts right now are advising to use |
| Here is why you don't want to do it. When lenders are | | | | your credit cards as necessary and make the |
| making a decision as to whether to lend you more | | | | minimum payment and conserve your cash for |
| money they will look at how much credit is available to | | | | emergencies. |
| you now - they call this the utilization ratio. | | | | Your credit score or FICO score, report and history |
| If you have 5 cards now and they each have a limit of | | | | should not suffer if you continue to keep your credit |
| $10,000 or so each and you owe about $6000, your | | | | cards. The lenders also look at how long you've had |
| rate would be 12%, which is good, from their viewpoint. | | | | your cards and the longer you've had them the better |
| If you were to close 4 of the credit card accounts | | | | it will be in terms of your credit score and history. |
| then your utilization ratio would jump to 60% or so. This | | | | Credit cards, as much as they can be a problem, can |
| would be bad. Now you haven't even used the cards | | | | often come in handy in emergencies and should be |
| but it looks like you have which means you might look | | | | given some leeway for saving one from extreme |
| like you've overextended yourself. | | | | hardship. |
| You want to keep this ratio at 50% or below. So take | | | | So closing a credit card account won't raise your |
| a look at your credit cards and if you really don't want | | | | score but could lower it. Only do so if you have no |
| any of them don't close the accounts. Take the cards | | | | other option. If you absolutely have to cancel one of |
| you don't want and cut them up. This way you keep | | | | your cards, then cancel the newest one first, of |
| the accounts open and are not using them to rack up | | | | course, that has the shortest history to lessen the |
| more debt. | | | | effect on your credit report. |