Here are some things you should consider before closing a credit card account—it's like using your money superpowers wisely to protect your credit score!
Table of contents [Show]
Credit History
Closing a credit card is like closing a chapter in your money story. Before you do that, think about how long you've had the card. A longer credit history is like a valuable treasure—it helps your credit score. So, if it's an old card, be cautious about closing it.
Impact on Credit Utilization
Your credit utilization is like a special potion—it shows how much of your credit limit you use. Closing a card can reduce your total credit limit, which might increase your credit utilization. High utilization can hurt your credit score. So, think if you have other cards to cover the loss.
Outstanding Balances
If you have any money owed on the card, it's like a villain lurking around. Pay off the balances before closing the card. Leaving unpaid balances can negatively impact your credit score.
Fees and Rewards
Check if there are any fees associated with the card. It's like knowing the price of a magical spell. Also, consider if the card offers cool rewards or benefits. If it does, think twice before saying goodbye to those perks!
Credit Mix
Having different types of credit is like having a diverse team of superheroes. If the card you're closing is your only credit card, it might affect your credit mix. Lenders generally like to see a mix of different credit types, so think about how it fits into your credit team.
Future Plans
Imagine your credit cards as tools in your money adventure. Before closing one, think about your future plans. Will you need credit for big things like buying a car or a house? Keeping a card might help you in those exciting quests!
Long-Term Goals
Think about your long-term money goals. Closing a card may have a temporary impact, but it's like a small obstacle in a big journey. Focus on what's best for your long-term financial success.
