Do you have an account with Kohl’s and you are thinking of closing a credit card? Does closing a credit card lower your score? These are some important questions people ask. Keep reading to know if closing a credit card can lower your score.
There are various factors you need to consider that can affect your credit score, especially if you are using a credit card. One such factor is closing a credit card account.
Recently, many people and customers wonder, “Does closing a credit card lower your score”. Here, you will get to understand the impact of closing a credit card on your credit score.
Does Closing a Credit Card Lower Your Score?
Yes, closing a credit card can drastically lower or affect your score. Interestingly, when you pay off all your credit card account to $0 before canceling your card, it can lower your credit score.
Even though you not using your credit card account, leaving it open is advisable.
In addition, your credit or FICO score is a numerical representation of your creditworthiness. Furthermore, this numerical representation is calculated based on several factors.
Also, these factors include your payment history, credit utilization ratio, and new credit.
It is crucial and advisable to maintain a good credit score to have access to better financial opportunities.
What Happens When You Close a Credit Card Account?
Here are some ways in which closing a credit card can impact your credit score:
1. Credit Utilization Ratio
A credit score has the power of increasing or reducing your credit utilization ratio. Furthermore, this ratio is the percentage of your available credit that you are using.
In addition, closing a credit card account reduces your overall available credit. Interestingly, this can, in turn, increase your credit utilization ratio. A higher credit utilization ratio can have a negative impact on your credit score.
2. Length of Credit History
Closing a credit card account can shorten the average age of your accounts, especially if it’s one of your oldest cards. A shorter credit history can potentially lower your credit score.
3. Credit Mix
Having a diverse mix of credit accounts, such as loans, and mortgages, can influence your credit score.
Also, closing a credit card account can decrease the diversity of your credit mix. When you have a decrease in your credit mix, it could have a slight impact on your credit score.
4. Payment History
Your payment history reflects your ability to make timely payments on your credit accounts. Furthermore, closing a credit card does not directly impact your payment history.
Also, late payments will still be documented on your credit report which can affect your credit score.
Closing a credit card can have an impact on your credit score. This impact can be seen when there are changes in your credit utilization ratio and credit history.
However, the extent of this impact varies depending on your unique credit profile.
Before deciding to close a credit card account, carefully evaluate your financial situation and consider the potential consequences.
