Many people have different ways of handling situations, and in this modern world, when you think of doing something a specific way, another will look for his own way of doing it that will be more suitable to him or her.
For example, closing a credit card may seem like a simple decision, and it can have implications on your credit score. But some people still prefer going for this route since they see it as the best way to control their expenditures better.
Well, you might condemn the person and prefer a different route: However, with careful planning and strategic steps, it is possible to close a credit card without significantly impacting your credit.
Well, in this article today, we will provide a step-by-step guide on how you can close a credit card without hurting your credit score.
How to Close a Credit Card Account Without Hurting Your Credit: A Step-by-Step Guide
Follow the steps below to easily close your credit card account without affecting your credit score.
1. Evaluate Your Credit Utilization
The first thing you have to do when you want to close your credit card is to asses and verify your overall credit utilization. This is the percentage of your available credit that you are currently using.
If you have a higher credit utilization ratio, then closing your credit card is a bad idea because it will affect your credit score immediately. However, if you verify and it's low or absent, then you are good to go.
If closing the card will significantly increase your credit utilization, consider paying down your previous balances or transferring them to other open credit cards to maintain a healthy credit utilization ratio.
2. Pay Off Any Outstanding Balances
It is important to clear out any available balances in your card before eliminating or closing it. Because if you close it when you still have some money in your balance, then it will still be reported to the credit bureaus, potentially harming your credit score.
And so, also, make sure you wipe it off all. Even if it remains small, there are ways of using them that will clear them off completely. Ensure you make all necessary payments before proceeding with the closure process.
3. Contact the Credit Card Issuer
The next thing on the list will be to reach out to the credit card issuer and inform them of your intention to close the credit card account. After you contact them, you should be ready to provide your account details and to answer some questions they'll ask you.
And if you do all of that, you will see how easy it will go when they are the ones that handle your things. Keep a record of your conversation, including the date, time, and the name of the representative you spoke with.
This can help you in the future if something happens to your account, then you can use it as backup so that something bad won't happen to your account. Or your account won't be affected.
4. Request a confirmation letter
Ask the credit card issuer to send you a written confirmation that the account has been closed at your request. This confirmation can be valuable in case of any discrepancies or future credit reporting issues.
5. Consider the Account's Age:
Keep in mind that the more your account age increases, the more risky it is for you to close your credit card account. But if it is a very young account, then it will be a breeze and risks are reduced.
The length of your credit history plays a role in your credit score calculation, and closing an older account might shorten your credit history.
If you have other credit cards that are relatively new or have a short credit history, it may be wise to keep your older credit card accounts open to maintain a longer credit history.
6. Monitor Your Credit Report:
After closing the credit card account, regularly monitor your credit report to ensure that the account is listed as "closed at the consumer's request." This notation is crucial because an account closure initiated by the issuer can have a negative impact on your credit score.
Some Frequently Asked Questions (FAQs)
How much will my credit score drop if I close a credit card?
While there's truth to the idea that closing a credit account can lower your score, the magnitude of the effect depends on various factors, such as how many other credit accounts you have and how old those accounts are. Sometimes the impact is minimal and your score drops just a few points.
Is it bad to close a credit card account?
A Populare phrase from the Executive Vice president and head of US Credit Cards and Unsecured lending for TD Bank, Chris Fred, "closing your cards will not only lower your utilization, but it also removes credit history, which damages your score in the length of history category.” This simply means it is bad to close a credit card since there will be a negative impact on your score.
What happens when you close a credit card with zero balance?
By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. And the higher your balance-to-limit ratio, the more it can hurt your credit score.
Can I reopen a closed credit card?
It's possible, since you can call up the card issuer and ask them to activate your old account. Whether they will do so depends on their policies and why the account was closed. If they are unable to reopen your account, you will need to start a new application and go through the same approval process as normally done.
Is it better to close a credit card or leave it open with no balance?
In general, it's better to leave your credit cards open with a zero balance instead of canceling them. This is true even if they aren't being used, as open credit cards allow you to maintain a lower overall credit utilization ratio and will allow your credit history to stay on your report for longer.
Conclusion or Final Thoughts
Closing a credit card without hurting your credit requires careful planning and strategic execution. By evaluating your credit utilization, paying off outstanding balances, contacting the credit card issuer, and keeping a record of the process, you can navigate the closure process smoothly.
Remember to consider the account's age and continuously monitor your credit report to verify that the closure is accurately reported.
By following these steps, you can close a credit card responsibly and minimize the potential impact on your credit score.