Does It Go Against Your Credit Record if You Cancel a Credit Card?

In the battle to get out of debt, you may be inclined to cancel one of your credit card accounts. While this can help you avoid accumulating more debt, it could also negatively affect your credit score. Before canceling your card, there are a few credit score issues to consider.

Credit Utilization Ratio

When you cancel a credit card, it could potentially hurt your credit utilization ratio. This is a ratio that is calculated by looking at your credit balances in relation to the total amount of credit that you have available. If you cancel a card once you pay it off, you are also losing all of that available credit. This could raise your credit utilization ratio and lower your credit score as a result of this change.

Length of Credit History

Your credit score is made up of several factors in relation to your credit history. One of the factors that plays a role is the length of your credit history. When you have had credit for many years, it looks more attractive than if you just opened up your first credit card account. If you cancel a credit card that you have had open for the longest amount of time, this can shorten your available credit history and hurt your credit.

Number of Cards

Even though canceling your credit cards can have negative effects, it can also help your score in other regards. One of the most common problems that people have is that they hold too many credit card accounts. If this is the case, canceling one of your card accounts may actually improve your credit. This would lower the total number of credit card accounts and help you get down to a more reasonable number.

Stopping Credit Card Use

When you decide that you no longer want to use your credit cards any longer, you may wish to cancel your account. Instead of taking this approach, you may want to simply cut up your cards. When you cut up your cards and just leave the accounts open, you will not use your card to accumulate more debt. At the same time, you leave your account open and maintain the length of credit history that you have on your record.