Ever thought of closing your credit card account but thought twice because doing so may hurt your credit score. As such, before closing any of your inactive accounts, consider these 10 things before you close it.
You could call it the tale of two credit card holders. In the last year, Craig Fuller, owner of a company called TransRisk, in Chattanooga, Tennessee closed a credit card and saw his credit score plunge from 760 to the mid-600s. And then there’s Nanette Miner, an educational consultant in Mount Pleasant, South Carolina, who closed three credit card accounts in May. Her credit score fell about 30 points, not a fun drop, but nothing like Fuller’s experience.
So why did Fuller’s score drop so much compared to Miner’s? It’s all in the details. If you’re going to close a credit card account, here are 10 things you need to know.
Age matters. Not your age; your credit card’s.
“The average age of your open accounts makes up for 15 percent of your overall credit score,” says Randall Yates, CEO of The Lenders Network, an online mortgage marketplace specifically helping people with credit issues. “So if the card you close has been open for a long time it really is better to keep it open, otherwise your score will be negatively affected.”
In Fuller’s case, he closed a credit card that he had since 1997 when he was in college. He has six other credit cards and around eight store credit cards, and the cards are all in good standing. But most of them, he says, are less than four years old. So when he got rid of his oldest credit card, the average age of his credit cards dropped from seven years to 3.8. To a lender, that long history of having nothing bad happen with your oldest credit card – that’s now gone and irrelevant.
Read more: https://money.usnews.com/money/personal-finance/banking-credit/articles/2017-07-11/10-things-to-know-before-closing-a-credit-card