I've often heard that once paying off a credit card that you should not close the account because it negatively affects your credit score. I'd like to close some accounts altogether, but I don't want to lower my credit or FICO score. What suggestions do you have to paid off credit card accounts? Also, does the non-closure apply to all types of credit cards i.e. store credit versus major cards like Discover, Visa, MC?
Thanks for asking the question about credit cards. I think this is an important topic and our experts will be responding soon with suggestions.
Shuttering an account can temporarily impact your credit score because it lowers the available credit you have. Counterintuitive, but that’s the way the FICO model works. When you have a lower amount, it ratchets up the proportion of debt to credit available and that’s not a good thing in the eyes of the scorers.
I recommend cutting up the card, period. Then forget about it. If it’s a card, that charges an annual fee, you may want to consider closing the account at some point, but be aware than your score could take a dip, so don’t do this when you’re in a mode where your score matters to you-looking for a mortgage, car loan, new job even.
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