The Impact of Closing Old Credit Accounts on Your Score
How do you feel when you clean out your closets or attic? It’s a great feeling to get rid of old things you don’t need anymore. The same goes for getting rid of old credit accounts. Closing old credit accounts can actually help you improve your credit score. Here are a few ways.
How Closing Old Accounts Can Help Your Score
First, closing old accounts can help you improve your credit utilization ratio. That’s because your credit utilization ratio is the amount of credit you’re using compared to the amount of credit you have available. When you close an old account, you’re reducing the amount of credit you have available, which can lower your credit utilization ratio. If you’re only using a small amount of your available credit, it can help you improve your credit score.
Second, closing old accounts can make it easier to manage your debt. When you have a lot of credit accounts, it can be tough to keep track of all of them. You may miss payments or forget to pay the minimum balance, which can hurt your credit score. By closing old accounts, you can reduce the number of accounts you have to manage, making it easier to stay on top of your debt and improve your credit score.
Exceptions to the Rule
There are a few exceptions to the rule that closing old credit accounts can help your score. For example, if you have a very old credit account that’s in good standing, it might help you to improve your average age of accounts, which is another factor that affects your credit score. However, if the account is in bad standing, it’s probably better to close it.
Ultimately, the decision of whether or not to close an old credit account is a personal one. If you’re not sure what to do, it’s a good idea to talk to a credit counselor or financial advisor. They can help you assess your situation and make the best decision for your credit score.
