Before you Cancel Your Credit Card

It is a very sad fact but a recent survey showed that Americans have an average of eight credit cards. These credit cards could come from different places – from your banks, online and store credit cards so that you could buy the appliance you want. What’s worst is these credit cards are just used once and they become dormant in your wallet until you receive the annual charge, if you will notice them.

That will also mean that the average line of credit given to American consumer every month is no less than $24,000 – $40,000 a month. That’s a whole lot of credit line considering the annual earnings of the middle class American is within that range as well.

What’s ever sadder is the credit line will be affected as soon as you sign up for one credit card. If you think that signing up for a credit card and cancelling them the next day will not affect your credit, think again. Like a bankruptcy record, credit card records will stay in your file for seven years. That means when you cancel a credit card, you diminish the chances of having another credit card. If you would get one, the interest rate of the later credit card would be higher.

FICO (the most recognized credit rating agency) considers a lot of things that will constitute your credit score. Two of those things that will affect your credit score are the number of credit cards. If you go beyond seven, your credit score will definitely go down. Next is the length of use of the credit card. Obtaining a credit card and cancelling them the next day is very bad for your FICO credit score.

When you already have eight credit cards, don’t just cancel the ones that you don’t need if you care for your credit score. Since you already have them, enjoy the credit cards. But never max out these credit cards or else you’ll go broke in less than six months. Stay with the budget and distribute your spending in each credit card. Since you already have eight credit cards and your credit score has been affected, you just have to use them to improve your credit rating. If you use your credit cards and pay them all on time with the right amount, your credit rating will considerably increase.

On the other hand, if you are really itching to discard a credit card, here are some tips:

• Keep the old ones – as we have already indicated, your credit score could greatly improve when you keep your credit card for a very long time. In fact, 15% of your credit score constitutes of your ability to hold a credit card and other types of loans.

• Keep the reputable ones – a credit card with a very bad name is always a no-no. There are a lot of credit cards that actually scams their costumers through hidden fees.

• Ensure that you closed the account at your request – there are lending companies who will check why you have a closed credit card account. If it indicates that it’s due to non-payment, it will really look bad on your record. A note that you cancelled your credit card at your request will go a long way.

• Do not cancel them all at once – any drastic movements in your credit will alarm lending companies and your credit rating. Cancelling one credit card every month is not a bad idea.

Your credit card might be the cause of a low credit score but you can use the same credit cards to improve your credit rating to access different services with lower interest rates.