Don't Close Your Paid Off Credit Card Account

November 21, 2019

© Danielfela | Dreamstime

Categories: 

Paying off a credit card is probably one of the most adult things you can do! And after years of chipping away at that debt, you may be eager to close the account for good!  Not so fast, say the experts. Although it seems like closing the card would be the most responsible choice, it can actually be detrimental to your credit score. First, you’re erasing data that shows you are a responsible borrower, and it can be particularly problematic if it’s the oldest card in your wallet. Your length of credit history accounts for 15% of how your FICO score is calculated, so it’s important to keep your oldest cards open so that you don’t decrease the average age of your accounts. Another reason you shouldn’t close your credit card is you want to keep a lowered credit utilization ratio (the percentage of credit used compared to how much you have available). Generally, when it comes to credit utilization, the lower the ratio, the higher the credit score, as amounts owed on all of your accounts makes up a whopping 30% of a FICO score. So keep your paid off card open, just do not use it (or if you do, pay it off before you owe interest).

SOURCE: Apartment Therapy 

See and hear more from the 98.5 KTK Morning Show

98.5 KTK Morning Show Podcast