• About Me
  • Courses
  • Contact
    • Ads
  • Press & Media
  • Free eBook
  • Free Facebook Group
  • Disclosures
    • Privacy
Yes, I Am Cheap
ADVERTISEMENT
  • Home
  • News
    • All
    • Politics
    stimulus

    Why You Might Not Get A Stimulus Payment

    Credit card security, equifax data breach

    How to Claim $125+ from the Equifax Data Breach Settlement

    foreclosure homes - When Does It Make Sense to Refinance?

    When Does It Make Sense to Refinance?

    no apple

    Get A New iPhone? Heck No!

    poor definition

    Mom Fired For Working At McDonald’s While Kid Plays In Park…Was She Wrong?

    What’s Keeping You From Finding A Job

    U.S. Students Fall Behind: Seemingly Get Dumber By The Minute

    Trending Tags

    • Trump Inauguration
    • United Stated
    • White House
    • Market Stories
    • Election Results
  • Lifestyle
    • All
    • Food
    • Health
    mask insert

    Wearing A Mask? This Can Help You Breathe Easier

    high deductible health plan

    What Is A High Deductible Health Plan?

    free thanksgiving dinner

    How to Get Your Thanksgiving Meal for Free

    using hand sanitizer, your own

    How to Make Your Own Hand Sanitizer

    Yoga pose

    5 Ways to Practice Yoga on a Budget

    Traveling, new cultures, Start a Saving Challenge, Spend Smart on Food

    3 Simple Ways to Save for A Vacation

    Trending Tags

    • Golden Globes
    • Game of Thrones
    • MotoGP 2017
    • eSports
    • Fashion Week
  • Investing
  • Make Money
  • Learn Something
  • News
  • Reduce Debt
  • Rental Property
No Result
View All Result
  • Home
  • News
    • All
    • Politics
    stimulus

    Why You Might Not Get A Stimulus Payment

    Credit card security, equifax data breach

    How to Claim $125+ from the Equifax Data Breach Settlement

    foreclosure homes - When Does It Make Sense to Refinance?

    When Does It Make Sense to Refinance?

    no apple

    Get A New iPhone? Heck No!

    poor definition

    Mom Fired For Working At McDonald’s While Kid Plays In Park…Was She Wrong?

    What’s Keeping You From Finding A Job

    U.S. Students Fall Behind: Seemingly Get Dumber By The Minute

    Trending Tags

    • Trump Inauguration
    • United Stated
    • White House
    • Market Stories
    • Election Results
  • Lifestyle
    • All
    • Food
    • Health
    mask insert

    Wearing A Mask? This Can Help You Breathe Easier

    high deductible health plan

    What Is A High Deductible Health Plan?

    free thanksgiving dinner

    How to Get Your Thanksgiving Meal for Free

    using hand sanitizer, your own

    How to Make Your Own Hand Sanitizer

    Yoga pose

    5 Ways to Practice Yoga on a Budget

    Traveling, new cultures, Start a Saving Challenge, Spend Smart on Food

    3 Simple Ways to Save for A Vacation

    Trending Tags

    • Golden Globes
    • Game of Thrones
    • MotoGP 2017
    • eSports
    • Fashion Week
  • Investing
  • Make Money
  • Learn Something
  • News
  • Reduce Debt
  • Rental Property
No Result
View All Result
Yes, I Am Cheap
No Result
View All Result

Closing Credit Cards Can Be Good For Your Credit Score

Sandy Smith by Sandy Smith
February 4, 2021
in Credit
0
girl with credit card and mobile phone
Share on FacebookShare on Twitter

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.


Welcome back! Have you checked out the free webinar on how to establish credit for your small business?


You’ve already heard everything that there is to know about improving your credit scores.  Conventional wisdom says to pay all of your bills on time; don’t have too many cards ; have a good mix of credit types; and never, ever close any credit cards. That last isn’t always true though.  I say that closing your credit cards can sometime raise your credit score.

If you use credit like the average American, the time will come when your shopping habits change and you decide to purge your wallet of unused plastic.  This most often happens with department store or branded credit cards.  Or perhaps you signed up for a card to get a 20% discount and you never use it anymore.  You want to close the credit card, but your hands are tied because you don’t want your credit score to suffer a hit.

Yes, closing a credit card can adversely affect your credit score, but if done wisely, the impact might actually be a positive one.

When the credit agencies calculate your credit score, there are a number of different factors that are considered.  Some of the major ones are:

  • Length of your credit history
  • The number of open credit lines
  • Debt to available credit limit
  • Your payment history
  • Average age of your credit cards

The bullet point that we will pay attention to here is the final one: the average age of your credit card.  The credit agencies basically look at all of your open credit cards to calculate the average age.

Consider for a minute the following examples.

  1. Our test subject, let’s call her Sandy, has a student credit card that she has had for 10 years.  The card terms are horrible but it’s her oldest credit card so she’s afraid to close it. Chase Bank offered a sweet new credit card with a nice 0% introductory rate that she would like to take advantage of.  She applies and gets a new credit card.  If she has no other cards, what is the average age of her credit cards?
    The answer is 5 years.
  2. Once the 0% rate offer expires, test subject Sandy convinces Chase to offer her a rate of 1.99% for another year.  After the year is over the interest rate jumps to 22.99%.  Knowing that she can get better offers from a competing bank, she drops the new card in the trash like last week’s leftovers.  If she closes the card opened in just one year ago and keeps the one opened when she was a student 11 years ago, what is the average age of her credit cards if she has no other cards?
    The answer is 11.

By closing the new credit card, I, uh, I mean she, has increased the average age of her credit cards.

Here’s one rule to adhere to when closing credit cards: if you can, never close your oldest credit card.  It doesn’t matter if it’s an old student card that you haven’t dusted off since Super Mario Brothers was the hottest video game in the stores.

One a side note, a trend that I’ve noticed is banks closing credit cards that cardholders are not using or drastically reducing the available credit limit.   They do this because they are not making money from you, and you are tying up available credit.  They would rather transfer that credit card to someone else up to their eyeballs in debt who likes to hear the sweet sound of the cash register every time they swipe their credit cards.

Hang on to that grandparent of a credit card with a death grip because it will help to increase the average age of your credit cards.  You don’t have to keep a balance on it, but make a purchase using that card once-in-a-while to keep the bank happy.

One last thing.  Don’t forget that the number of credit cards that you apply for also impacts your credit score.  This is called a “hard inquiry”.  Those inquiries will stay on your credit report for two years, but the updated FICO scoring model, used by most lenders, counts them the most during the first year.  Also, if new credit applications are clustered together within a short-time period, the impact to your credit score will be minimized. If you will be dropping your newest card to get a better deal on another card please consider applying for a new card once the last inquiry has fallen off of your credit report.

As you see, you don’t always have to be held hostage by a credit card.  Getting rid of a credit card really can positively impact your score if done wisely.

Related

Previous Post

Hath were you beast

Next Post

Food Labels And Terms That Fool You

Sandy Smith

Sandy Smith

I started this blog years ago as a way of keeping myself accountable to my own debt reduction plans. Now I'm using this site to help others get out of debt, and learn about personal finance so that they can live their best lives.

Next Post
food labels

Food Labels And Terms That Fool You

Stay Connected

  • 5.6k Fans
  • 10.1k Followers
  • 4.7k Followers
ADVERTISEMENT
  • Trending
  • Comments
  • Latest

I Lost My Purse

February 6, 2021
If I Had A Million Dollars

If I Had A Million Dollars

February 5, 2021
Don't Fall for the Call Forwarding *72 Scam

Don’t Fall for the Call Forwarding *72 Scam

February 6, 2021
10 Ways To Save Money On Gasoline

10 Ways To Save Money On Gasoline

February 4, 2021
Federal Student Loan Debt Relief

Why Some People Should Wait Before Applying for Student Loan Forgiveness

October 18, 2022
AirBnb Experiences

Why Airbnb Experiences Are The Best Side Hustle

July 10, 2021
mask insert

Wearing A Mask? This Can Help You Breathe Easier

February 21, 2021
Scams

What’s The Deal With All The Scammers Lately?

February 18, 2021

Recent News

Federal Student Loan Debt Relief

Why Some People Should Wait Before Applying for Student Loan Forgiveness

October 18, 2022
AirBnb Experiences

Why Airbnb Experiences Are The Best Side Hustle

July 10, 2021
mask insert

Wearing A Mask? This Can Help You Breathe Easier

February 21, 2021
Scams

What’s The Deal With All The Scammers Lately?

February 18, 2021

Helping you live your best financial life through personal finance news and education

Follow Us Everywhere

Browse by Category

  • About Me
  • Auto
  • Credit
  • Credit Cards
  • Finance 101
  • Food
  • Get Out of Debt Course
  • Health
  • Investing
  • Learn Something
  • Lifestyle
  • Make Money
  • News
  • Off The Reservation
  • Partner Posts
  • Politics
  • Rants
  • Reader Advice
  • Recipes
  • Reduce Debt
  • Rental Property
  • Save Money
  • Scams
  • Special Offers
  • Spend Money
  • Sponsored Posts
  • Video Pick
  • Weekly Roundup
  • Work

Recent News

Federal Student Loan Debt Relief

Why Some People Should Wait Before Applying for Student Loan Forgiveness

October 18, 2022
AirBnb Experiences

Why Airbnb Experiences Are The Best Side Hustle

July 10, 2021
  • About
  • Advertise
  • Privacy & Policy
  • Contact

© 2021 Say Yes Services LLC. All rights reserved.

No Result
View All Result
  • About Me
  • Courses
  • Contact
    • Ads
  • Press & Media
  • Free eBook
  • Free Facebook Group
  • Disclosures
    • Privacy

© 2021 Say Yes Services LLC. All rights reserved.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are as essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT