Why Not to Close a Credit Card Account?

We all know there are many good reasons to open a credit card account. It can be for the free travel rewards air miles you will receive, for the added line of credit you may need or for the security you feel from owning a large number of credit cards.

But did you know there may be many reason why NOT to CLOSE a credit card account? The majority of these reasons have to do with maintaining or increasing your credit score. When you close a credit card you reduce your debt to available credit ratio. This will reduce your credit score. Your credit score is made up of a number of factors including:

1. how many accounts you have,
2. how long you’ve had them,
3. the level of your balances,
4. your payment history and
5. the number of credit lines you have.

Rather than closing your credit card accounts negotiate with your credit card companies to remove all annual fees, ask for lower interest rates and other benefits. Keeping credit cards active even if you don’t keep much of a balance on the card helps your credit score. The fewer lines of credit you have in relation to your debt, the lower your credit score rating will be. So maintaining several credit card accounts is good for your credit score.

When you close a credit card with a balance or a credit card with available credit on it, your total available credit is lowered to $0.

In the case of the card with a balance on it then it, this looks like you’ve maxed the card out. The amount of debt you have accounts for 30% of your overall credit score; so a maxed out credit card, or one that appears to be maxed out, can have a negative impact on your credit score.

If you close out your oldest credit card it will shorten your credit history. Lenders like to see that you have a very old credit card and that you have made timely payments on it over a long period of time.

To summarize the main ideas:

• It is good to have several credit cards accounts.
• Don’t close out your oldest credit card accounts, renegotiate for lower interest rates, no annual fees and other benefits on these old cards.
• Don’t close a credit card with a balance on it.

So rather than closing a credit card you may even wish to open a few more credit  card accounts and thereby increase your credit score. CreditCreator.com has many  of the best credit card offers available and can help you apply for a credit card safely and securely online. We offer credit card rating information which will help you in your credit card selection.