If you have debt, closing a credit card account seems like it would be the smart thing to do. But sometimes, it’s not. In fact, did you know doing that closing credit card accounts can hurt you credit score?
Here are two reasons why:
- History – If you have to close an account, try to avoid closing the oldest ones. Why? Because the longer an account has been opened, the better it is for your credit score.
- Utilization Rate – Utilization rate is the percentage of available credit you use, versus the amount you have available, and it accounts for 30% of your credit score. It’s better to have more credit available and use less credit, so closing a credit card account can hurt your score.
Bottom line, closing credit accounts can hurt your score, so remember to think about your history and utilization rate before you start closing them.