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Why does closing a credit card account hurt your credit score?

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Why does closing a credit card account hurt your credit score?
Old 01-24-2020, 09:04 AM
  #1

I opened a Capital One card a few years ago explicitly to earn miles to help fund our trip to Europe. I think there was also a promotion of 0% interest for the first 12 months.

Now, it's biting me in the a$$. I have about a $1700 balance (not from the trip, but from a few college audition expenses, and a car repair...). There's atrocious interest each month, and there's a yearly membership fee of like $60 or so. What the heck?

As soon as I pay that balance off, I want to close the account, but I've heard that it hurts your credit score to do so.

Advice?


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Old 01-24-2020, 09:15 AM
  #2

Iíve heard that, too, but it didnít hurt my score when I closed a couple of old accounts.
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Old 01-24-2020, 10:00 AM
  #3

Because it changes your debt to credit ratio. If you donít have any other cards with a balance closing that one probably wonít do much to your score.
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Credit score
Old 01-24-2020, 10:12 AM
  #4

When you close a major credit card (VISA, MasterCard, Discover), it lowers your debt to credit ratio. Say you have 2 credit cards, each with a credit limit of $2000. Your total available credit is $4000. You charge up to $800 a month total on average. You're using 20% of your available credit. You cancel one of those cards so that your new credit limit is $2000 and you average $800 a month in charges - now you're using 40% of your available credit. Your debt to credit ratio decreased.

There are SO many cards available that do not have an annual fee. Clark Howard says: Before you cancel one of those cards with an annual fee, see if you can be downgraded to a version of the card with no annual fee. https://clark.com/credit-cards/clark...it-card-rules/

He also says Itís best to have a ratio ó overall and on individual cards ó of less than 30%. To boost your score even quicker, keep your credit utilization ratio under 10%. https://clark.com/credit/5-sneaky-wa...-credit-score/

For many years, I've had only one major card. I recently opened a second. My credit score took a hit of about 12 points because now the overall AGE of available credit is newer than it used to be. Because of the way I use credit, I still have a great score and I expect that it will increase within a few months.
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I don't think it hurts that much
Old 01-24-2020, 10:28 AM
  #5

I recently closed my Capital One account. My score dropped for a couple of weeks, and then it went back higher than it was before.
I don't understand how they figure the scores. One of the things we lost points for was that our oldest account wasn't old enough. We have had that account for 39 years.


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Old 01-24-2020, 10:39 AM
  #6

Does it hurt your credit if you pay what you owe before the due date?
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Old 01-24-2020, 10:43 AM
  #7

Quote:
Does it hurt your credit if you pay what you owe before the due date?
No. By doing so, you may be helping your debt to credit ratio. The primary major credit card I have and use is through my credit union. I know that the credit bureaus look at the balance on Saturdays to update their information. I've set a reminder on my phone for Fridays to check and pay my VISA. Since it's through my credit union, it's just a matter of a transfer from one account to my credit card account.
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Old 01-24-2020, 11:26 AM
  #8

Thank you! I do exactly as you do because my Visa is through my credit union.
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Old 01-24-2020, 01:53 PM
  #9

Have you looked into a balance transfer to a credit card with a more reasonable interest rate?
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Old 01-24-2020, 05:30 PM
  #10

My FICO score just went down because I had paid off a card (so it went up, because the card was still open and all that credit was available to me) but then I transferred money from dh's higher interest card over to mine (0% interest for 21 months). I definitely would call and see if you can move to a card with no annual fee. Usually they'll want to keep you and may give you something else. Dh has several capital one cards from when he was trying to raise his credit (his credit was completely in the dumps), but I don't think any of his had annual fees.


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