A lot of people tend to close out their credit card accounts if they get too far into debt with their creditors. Apparently they have some kind of notion that this will make the debt go away, when this could not be further from the truth. Not only is this completely wrong, but the closing out of a credit card in delinquency hurts your credit badly.
Here is a look at five credit cards that you shouldn't ever close.
1 - You should absolutely never close a credit card that still maintains a balance. When you close out any credit card that carried a balance, your total available amount of credit is going to drop down to $0, but carrying a balance on a credit card without a limit looks like you maxed out that credit card and that looks bad on your credit reports.
2 - You should absolutely never close the only credit card you have that has available credit on it. Closing out a card that has available credit on it is going to decrease your total amount of available credit, increasing your credit utilization numbers which is a situation that is simply not desirable in any way, shape or form.
3 - You should absolutely never close the only credit card that you have. Because a part of your credit score has to do with what different types of credit you are utilizing, you are going to want to have at least one credit card at all times. You do not want to be turned down for credit in the future simply because your creditor doesn't think you have enough credit card experience, do you?
4 - You should absolutely never close the oldest credit card account on your credit report. Closing out an old credit card is going to significantly shorten your credit history. Tenders do not like borrowers that have shorter credit histories because they are perceived to be riskier in comparison to the borrowers that have much longer credit histories. When you close out an older credit card, your score may not be impacted immediately but in the future it certainly will.
5 - You should absolutely never close the credit card that has the best terms. Why should you let a good thing go away? If you have a credit card possessing a good interest rate, a lack of an annual fee or some other perks that make it worthwhile, you should absolutely keep it. If you have a credit card with really good terms that charges you less for making your purchases, then this is far better than opting for one that charges you more.
Photo credits: szlea
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