Does canceling credit cards affect your credit score?

This can lower your credit score in two ways, but fairly minimally.

One metric credit card issuers can look at is called debt burden, which is basically the amount of credit you use, divided by the amount of credit you have available.  The lower this number, the less risky you are perceived to be and teh higher your FICO Credit Score.  This can be lowered by either using less credit, or having more credit available to you.  By reducing the credit you have available, like canceling a credit card, the higher your debt burden, the lower your FICO score.

As well, the longer you hold a credit card account in good standing, the better.  This means that older credit card accounts carry more weight than newer accounts because they can demonstrate a long term ability to pay on time.  If you have a good payment rate (i.e. you pay on time, all the time) then this will help demonstrate to issuers that you manage your credit responsibly, which Banks like.

So what do you do?

  • If you never use your card, make sure the balance is paid off and there are no fees for not using it or no fear someone will find and start using it, it is better to keep it and use it occasionally.
  • If the bank calls to ask if you will close your account for not using it, you should have the right to refuse their request and keep the account, and the credit line, open.

answered on Quora

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