How does canceling a credit card affect your rating?

Answer 1

One of the ways cancelling a credit card can affect your credit is as follows: Lenders like to see long, established and stable credit histories. Keeping accounts that are paid in full and not delinquent shows accountability and adds promise that you'll be a stable customers should a lender decide to open and account for you. On the other hand, opening accounts, running up the balance and then closing them shows a slightly more erratic pattern, and that's likely to scare off creditors. It's not neccessarily the number of accounts you have on your credit history but the amount of the balances and the payment history. Here is more input: * It will have a temporary negative affect upon an individual's credit history. * I have been compiling information on this subject for a book I plan to write about credit card companies. One of the factors that go into your credit score is how much you owe cumulatively verses what your cumulative credit limits are. For example, let's say you have 2 credit cards. On one card you have a $1000.00 limit and you have a $250.00 balance and on another card, you have a limit of $3000.00, and you carry a $750.00 balance. that means cumulatively you have a $4000.00 limit, and you carry a $1000.00 balance, which is 25% of your credit line. Let's say you close the account that has the $3000.00 limit, which cancels that credit line. Assuming you don't pay off that card immediately, and plan to pay it out in installments, now you have a $1000.00 balance, and a $1000.00 credit line, which means you now have a 100% balance to credit line ratio. In that case, your score would go down, at least until you pay down more on your balances. But sometimes, the benefits of closing an account out-weigh the temporary set back on your score. For one thing, you force yourself to behave by limiting how much you can spend. It's up to you what you want to do. Think about it and weigh it out before you act.