How To Properly Close Your Credit Account

Before you cancel your credit card, find out how to properly close it and improve your credit.

The best thing to do when trying to fix your credit is trim the fat. This includes those extra credit cards. A good rule of thumb is to have 1 or 2 cards that you pay off every month. If you can’t pay them off, at least pay them way down. However, there are some credit cards that you should never cancel once you get them.

If there is still a balance on a card, closing that card will give you $0 available. This shows as whatever negative balance you have, and no credit limit. It’s a double whammy because it appears maxed out. If you have a couple cards, don’t cancel the one with available credit. It lowers your total available credit limit. Your credit utilisation score will be negatively affected.

If you’re down to one card, don’t cancel it. Later on down the line it will look like you can’t handle credit cards. Nobody will want to give you another one. Try to cancel other lines of credit first, like rental furniture and appliances.

Your oldest credit card account should be your best friend. Don’t ever close this one out unless absolutely necessary. It gives the appearance of a shortened credit history. Lending companies don’t want to risk giving money to someone with limited credit. This is exactly the boat you put yourself in. You’ll be basically starting over.

Finally, this one may seem like a no-brainer, but you would be surprised. Don’t cancel the card with the best rewards and terms. Some people don’t even understand the fine print of a contract. They get a high balance on a card and freak out, But if they cancel the card with the higher interest rate and monthly fees, that’s more money that can go toward the balance of the good card.

For additional information on credit cards or related topics please visit our library of credit card articles.