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How credit score is affected by closing credit cards

November 28, 2011 by · Leave a Comment 

If you are trying to cut down on expenses and pay off your credit card debts you think that closing credit cards is a good way to get started as you will not be accumulating more credit. But closing your credit cards will have a negative impact on your credit score. How does this happen?

A key factor in determining the credit score of a person is the credit to debt ratio. A person who uses less than 30% of the credit available to him will get more points towards his credit score than a person who has used a higher percentage of the credit available to him. Therefore having more credit cards mean that you have more credit therefore lowering the percentage you spend.

Another factor affecting the credit score is the credit history. Longer the history the better it reflects on the credit score. Therefore closing the oldest credit card means you are closing a part of the credit history.

One needs to weigh the pros and cons of the above situations, if you have no control over your spending you are better off closing the card rather than accumulate more debt or continue paying high annual credit card fees.

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