Most of us don’t give much thought to our personal credit scores until it’s time to apply for a loan. Unfortunately, by then it will be too late to make a difference in your score, and that can cost you a higher interest rate. At worst, a bad score could make it extremely difficult to obtain a loan.
One typical strategy many people take when attempting to improve their credit rating is to close out old credit cards. However, this is generally a big mistake, and can have the exact opposite effect on a credit score from what you were striving to achieve. To help figure things out, financial experts suggest you not close out the following credit cards:
The card with the best terms: If you must close some accounts, consider closing those that are charging you more. If a credit card is providing lots of attractive perks with no annual fee, no hidden charges, and at a very low interest rate, closing it will actually hurt your credit.
The oldest account: Your credit score is also bolstered by demonstrating a long credit history. Therefore, it is not at all a good strategy to close your old credit card accounts in an attempt to repair your credit.
The only card you have: Your credit score depends very much on how many different types of credit you are using. This way, having at least one credit card will actually help you improve your credit situation.
An account with a balance: When you close these cards, your total available credit becomes zero, but you still have a balance on it, which gives the impression that you have maxed out. Having a credit card that appears to be maxed out will adversely affect your credit score.
Having said all this, taking a temporary hit to your score may be worth the satisfaction of canceling a credit card you don’t need or want anymore. Of course, since timing is everything, don’t do it just before a lender plans to check your credit history (such as when applying for a mortgage).
For helpful articles pertaining to savvy credit card management, visit: https://www.moneycrashers.com/how-to-use-credit-card-wiselyrewards/