If you’re anything like me, your wallet is overflowing with cards. From gift cards, to business cards, the clutter can be confusing, especially when standing in a checkout line. Getting rid of the excess is easy, but what about all those credit cards? There’s the one from back in college that you’ve had for donkeys years, and the apple of your eye that has been swiped countless times! Your rewards card collecting dust – and it isn’t the only one either. You’ve plenty of lines of credit open, and suddenly your post is stuffed full of bills demanding payment for credit cards that barely see the light of day! So you’ve decided to cancel a few. Great! But which ones? Won’t it affect your FICO score?
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The FICO Score Factor
A FICO score is based on a multitude of factors, but there are three factors you may be in jeopardy of affecting with the cancelling of credit cards: your ‘amounts owed’, your ‘length of credit history’, and your ‘types of credit in use’.
- Amounts Owed: The amounts owed section of your scored is determined by how many accounts you have with balances, how much you currently owe in loans, and the percentage of available revolving credit you own. It accounts for thirty percent of your score. The lower these numbers are, the better! So stay on top of your credit card debt, and you shouldn’t have much to worry about on this end.
- Types of Credit In Use: The more types of credit lines you have open, the higher this number may be. But it’s only ten percent of the score, so any change in this number will have a minute affect on your overall number.
- Length of Credit History: This is a score found by calculating the average length of time you’ve had an open line of credit. It’s fifteen percent of your score, and will only really take a hit if you choose to cancel your oldest and/or newest credit cards.
Since we now have a better understanding of how a decision like cancelling credit cards can affect our crucial FICO scores, we can move forward with narrowing down the selection process of cards to cancel.
Annual Fee Credit Cards
This is the one card we all have that offers great rewards but never gets used. It was super handy when it got you that first class ticket that one time, but now it’s collecting dust in your wallet. Seeing as this credit card is turning into a waste of space at this point, you can definitely get away with scraping it. Save yourself the $100 dollar annual fee, and maybe consider converting to a no-fee credit card (but be warned, the swap could trigger a soft inquiry, but it shouldn’t affect your score.)
Old Secured Credit Cards That Can No Longer be Upgraded
This is the credit card we all sign up for when our scores need that little extra boost so we can get ourselves an unsecured card. But now, this credit card has fulfilled its purpose, and it’s time to kiss it goodbye. The only way closing this line of credit down is going to do any major damage to your score is if this is the card in your report you’ve held on to the longest. Even then, it’ll be minor, so this isn’t a card you shed tears over losing.
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Your First Unsecured Credit Card
Yes, it’s limit a measly and small and probably couldn’t cover one-week worth of expenses, but this is one of the oldest credit cards in your bag. Believe it or not, you are better off keeping this card, because it shows those pesky FICO people that you can commit to a line of credit and stay up to date with it. It shows you’re dedicated and dependable, and responsible enough to pay your debts in a timely manner over an extended period of time. Us this card for gas once or twice a month to keep the good record going steady, and it’ll boost up your score enough to compensate for any marks lost as a result of cancelling the other cards.
The Rewards Card with the High Revolving Balance
This is your best friend. This credit card is your go to for every swipe, online purchase, Starbucks run – you name it. When you hit that register, your fingers automatically gravitate to this card. Unfortunately, your best pal is becoming increasingly expensive as time goes by. The more you charge, the more your interest rates are building, the more debt you rack up. You want to say goodbye, but you don’t want it to bite you in the butt. Well, the good news is, you can totally keep the awesome benefits that come with your favorite credit card companion, without the high interest rates. Move your high-interest debt to a 0 percent introductory APR card, and then keep this card open. Pay off the balance every month in full, and never worry about that high interest again.