When Not To Cancel Credit Cards
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
When Not to Cancel Credit Cards
Summary:
While canceling old or unused credit cards can seem beneficial, it's not always the best choice for your credit health. Sometimes, keeping an open line of credit is more advantageous.When to Keep Your Credit Card Open
Before Applying for a Major Loan
If you're planning to apply for a major loan?"like a mortgage, car loan, or boat loan?"it's wise to keep your credit cards open. Closing these accounts, even if paid in full and on time, could negatively impact your credit score.Understanding Credit Scores
Credit bureaus calculate your score using various factors, including your credit utilization ratio. This ratio is the total debt on your credit cards divided by your total available credit. A lower ratio is preferable.Consider this: if you have $5,000 in debt and $15,000 in available credit, your utilization ratio is 1/3. However, if you cancel a card with a $5,000 limit and no balance, your available credit drops to $10,000, raising your utilization ratio, which can harm your credit score.
Key Takeaway
Avoid closing credit cards before securing a major loan. Keep them open until after finalizing the loan to protect your credit score.When You Can Cancel
If you're not planning to apply for a significant loan and your old cards have a zero balance, you can close them without affecting your credit score.You can find the original non-AI version of this article here: When Not To Cancel Credit Cards.
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