Your credit score will be affected by the points that were taken off of it. A lower credit score makes it harder to get a loan or a credit card in the future. It can also make it less likely to qualify for an apartment or a loan.
Even with a low credit score, it doesn’t mean that you should never close a credit card. Instead, it’s important to think carefully about how you treat it.
There are many reasons to cancel a credit card. You might be tired of paying the annual fee and want to get a better rewards program.
Does Closing My Credit Card Account Hurt My Credit Score?
Closing a credit card account may impact your score negatively. It can also hurt if it’s an older, high-limit card. When you close a credit card account, the amount of available credit you have suddenly jumped up. This tells lenders that you’re using a higher amount of credit and could pose a risk to them.
Getting a new credit card can also help lower your score in the long run. It can also help lower the average age of your credit report.
Your credit score is calculated by taking into account the length of time it has taken for you to pay off your debts and the number of years it has been since you opened accounts.
After you close a credit card account, your scores may decrease for a few months, but they usually rebound in a few months if you make your payments on time.
What Happens If You Close a Credit Card Account
When you close your Chase credit card account, you lose the available credit limit on that account. This causes a sudden jump in your Credit Utilization Ratio.
This rate is the portion of your revolving credit that’s used to pay off the debts that are currently accruing.
Closing a credit card account increases your credit utilization ratio. It shows that you are using a higher amount of available credit.
If your Chase credit card account has been open for a long time, closing it can lower the average age of the credit card accounts on your credit report.
The average age of your credit card accounts is one of the factors that go into the calculation of your credit scores. As such, lowering the average age of your credit card accounts can lower your credit scores.
While your credit scores may take a hit initially after closing a credit card account, they typically rebound in a few months if you do not go into delinquency and continue to make your payments on time.
So the bottom line is, do not close your Chase credit card, or any credit card for that matter, if you plan to apply for other credit, such as a mortgage or auto loan, in the next few months.
Is it better to close a credit card or leave it open with a zero balance?
Sometimes, it’s possible to close a credit card account to save money and help boost your credit score.
Consider canceling your credit card if:
The credit card has a high annual fee: If you don’t use the rewards on your card regularly, it may be worth closing it. You may also want to transfer your account to a card that doesn’t have a fee.
You are overspending it: If you have a tendency to spend more than you can afford, closing an account can help you reduce your debt. However, it can also lower your score by transferring your spending to another account.
The credit card has a high interest rate: It’s also a good idea to avoid carrying a balance on a credit card if its interest rate is high. Doing so will help you avoid accruing interest.
Make sure that you pay off all of your purchases in full to avoid accruing interest. Also, avoid using the card frequently to avoid having it permanently closed.
You are upgrading to a rewards card: If you’re planning on transferring accounts, ask the issuer to transfer the account to another card instead. This will not affect your credit score, but it could lower it.
Don’t cancel your credit card if:
The credit card is the oldest account: Your credit score is influenced by the length of time that has passed since you last applied for credit. Having accounts open can help improve your score as it will keep them open.
If you have multiple accounts that have been open for at least ten years, the average age of these accounts is around five years.
Just because you don’t use it often: There’s no penalty for not using a credit card. However, if you do, the card issuer may cancel it. It’s important to remember that not using a credit card may affect your credit score.
You don’t have that many credit card accounts: Your credit score may be higher if you have a lot of accounts and a low credit utilization ratio. This is because closing accounts can increase your total credit available.
Benjamin is a certified financial advisor, with over 10 years of experience in the industry. He is knowledgeable about various business and financial topics, such as retirement planning and investment management. Ben has been recognized for his work in the financial planning industry. He has also been featured in various publications.