Closing an old credit card without sinking your credit score: Plain Dealing

Category: Auto Financing Published: Monday, 17 November 2014 Written by test

As you pay down your credit card debts and keep making on-time payments on all your accounts, your credit score will rise. Eventually, youll be in a better position to close cardswithout driving down your score.

Tipfrom the roadside manual: You mustpay more than the minimum every month to get rid of card debt. Need a step-by-step strategy for paying off credit cards? Find it here.

Long-distance drivers:

Youre taking the safe route. You pay bills on time every time and regularly pay cards off in full every month. Over the years, youve taken out a car loan or a mortgage or both, and you paid reliably.

Can you safely close an unused, paid-off credit card? Absolutely.

If youre someone that has a variety of credit a mortgage, auto loan, line of credit closing one credit card is not going to hurt your score, says Sprauve.

Look, any kind of change freaks out credit-scoring formulas. Opening or closing a credit card will temporarily shave points off any score. But because you have all that good credit history working for you, that dip is going to be small and fleeting.

Just to play it safe, avoid closing (or opening) a credit card in the six months before you apply for new credit. That gives your score time to readjust.

Tip from the roadside manual: Dont let fear about your score paralyze you from making credit decisions. Scores capture the big credit picture and thats what you should focus on, too.

Lane changers:

Youre in this group if youre in transition credit-wise. Maybe you had some trouble with bills, but now youre getting back on track. Or maybe youre a relatively new credit user who has only a few cards.

Can you safely close an unused, paid-off credit card? Maybe not right now.

As youre build or rebuild your credit, avoid unnecessarily closing credit card accounts even paid-offones. Each account change will dock points from your score. And the lower your score is when you make a change, the bigger the hit and the longer it can take to recover.

Jeff Richardson of VantageScore says that the point loss for closing an unused credit card can be 10 to 30 points. To put that into perspective ... a first missed payment caused a drop of 70 to 90 points, he says. In other words, there are bigger ways to trip yourself up.

But ifyou dont have credit card debts youre trying to offset, your unused card isnt helping your score. You have to use credit and manage payments -- to build your score. So why not put that card to work for you?

Use it for just one modest purchase every month or two -- something you would ordinarily buy anyway and know that you have the money to pay off. When you get the bill, pay it off in full.

With each payment, you build good payment history without accruing credit card debt -- and boost your score. This is a good way to rehabilitate a credit card you goofed with, too, so you can close it on a good note.

Once youve got a couple years of solid payment history on your side, you can close unwanted cards without damaging your score.In general, when youswitch credit cards, open the new account before you close the old one.

Tip from the roadside manual: Its not how much credit you have, its how you manage it. It is better to have one or two credit cards that are never delinquent and have low balances than multiple credit cards with high balances and a history of delinquencies, Richardson says.

What works for everyone:

Youll feel better about making credit decisions if you know what your creditors are saying about your accounts. Get your free credit reportfrom each of the three major credit bureaus by calling 1-877-322-8228 or visiting

Hits: 718