Cancel Your Credit Card Will Bring Down Your Credit Score!


Before I cancel one of my credit cards, my credit score was in the upper 740 and now it is in the low 700.

I was a bit confused about that so I did some investigating. I found out a few things not to my liking. Depending what you do financially, you can either lower or raise your credit score. Who knew cancelling a credit card can lower my credit score.

Under the Fair Isaac’s credit scoring system, canceling the credit card will affect my credit-utilization ratio. This is the second most heavily weighted category in the credit scoring system.

So what does this all mean? It means that the financial institutions do not like to see a ratio that is higher than 30 to 35 percent or less. For an example, let say you have three credit cards with a total credit balances of $30,000 and your total outstanding balances is $6,000. This will put you in the 20 percentile and you are in good standing with them.

However, my credit score was reduced because I somehow increased the percentage when I canceled it. I think this rating system is kind of stupid. I can understand if you default on a payment you get penalize for it, but canceling one’s credit card and get penalize for it, is just ridiculous to me. They just do not want us to cancel our credit cards.

The reason why I brought this up because your credit score determine if you can get a loan, the type of interest rate and other matters such as buying a car uses your credit score. There is a difference between paying 5 percent and 13 percent on interest rate. Do you seriously want to throw away your hard earn money? Think about the time we are in right now when everything is going up (gas price, price for eggs and milk). That is another matter which I will not go into.

Written By Leah

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April 15, 2008 | Filed Under Your Credit Score 

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One Response to “Cancel Your Credit Card Will Bring Down Your Credit Score!”

  1. Passive Income: Earn More Money With Little Effort : GetFatMoney.com on April 28th, 2008 3:08 pm

    […] Cancel Your Credit Card Will Bring Down Your Credit Score! […]

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