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 If you have read anything about how to get and keep a high credit score, you have probably seen this advice: never close your credit cards. This advice is true and good. Sort of.
The 2 parts of valid reasoning behind the idea of not closing any credit cards are:
- Closing a credit card will decrease your debt utilization ratio. A whopping 30% of your credit score is calculated from your Amounts Owed. Your debt utilization ratio (your total revolving debt divided by your total credit limit) needs to be as low as possible in order to reap the maximum credit score. Closing a credit card takes away some of your total credit limit, which can raise this ratio, and lower your credit score.
- Closing a credit card will impact your length of credit history. It's a fact that the credit scoring model looks at how long a person has had credit established; the longer, the better. Closing a credit card you have had for many years may cause your length of credit history to decrease, which can result in a lower score.
So, there are valid reasons to not close your credit cards.
ADVICE: Never close a card that has a balance, your only credit card, or your oldest credit card!
But what if you have a ton of cards, are aiming to streamline your finances, and want to close some of them? Which ones can you close that will have minimal impact to your credit score?
If you have made the decision to close some of your credit cards, choose these (in this order):
To read the rest of our newest blog post, click here to go to our blog.
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Compliance Corner -
The Consumer Protection Bureau, developed by Dodd Frank
The central mission of the Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans - whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.
The consumer bureau is working to:
- Educate - An informed consumer is the first line of defense against abusive practices.
- Enforce - Like a neighborhood cop on the beat, the CFPB supervises banks, credit unions, and other financial companies, and will enforce Federal consumer financial laws.
- Study - The consumer bureau gathers and analyzes available information to better understand consumers, financial service providers, and consumer financial markets.
Above all, this means ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families; that prices are clear up front; that risks are visible; and that nothing is buried in fine print. In a market that works, consumers should be able to make direct comparisons among products and no provider should be able to build, or feel pressure to build, a business model around unfair, deceptive, or abusive practices.
If you having any questions, please contact Michael Nichols at 800-264-8806, 501-734-1280 or |
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Upcoming Webinars:
Understanding Credit Scoring
Thursday, December 1
10:00 am - 10:30 am
Learn more about how credit scores are formulated, what they predict, and how they can be increased. Join us as we examine the factors that make up a credit score, common credit myths, and big credit mistakes.
Sign up now! Advanced Credit Scoring Wednesday, December 7
10:00 am - 10:30 am Beyond basic! Attend this webinar to find out helpful information about what is affecting today's credit scores, how people are scored, and how to get the highest score possible. (This is a continuation of information from our Credit 101 webinar). |
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