Closing A Credit Card Account

I have to wonder what correlation exists between closing a credit card account and your likelihood of repaying a debt. If there is no such correlation, then one would think that the credit scoring model should not be penalizing anyone merely for closing an account.

Is it just a myth?

Tina

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Hi Tina,

From a credit score standpoint, closing a credit card reduces the total credit limit available and this, in turn, negatively impacts the credit utilization ratio or Amounts Owed [30% of your FICO score].  For most people, closing a credit card will be scored as at least a marginally negative event.  One viable option for many, may be to close a credit card after requesting a credit limit increase on an existing card you intend to keep.  All in all, credit card companies don’t like me.

Thanks for the questions and hope this helps.

Paul