Can your credit record/score go down from cancelling a credit card?

Question

... when the balance is paid off. I'm thinking about getting a credit card to establish credit (I have NONE right now and I'm almost 21).

Answer 1

Yes it can. Part of your credit score is calculated by looking at your available credit and your used credit or credit balance as a percentage of that available credit. So if you cancel a credit card, your available credit goes down, your used credit or credit balance at that point however remains the same, so the percentage of balance to available goes up which will drive your credit score down.
Example: You have two credit cards, one $100 the other $200.
On the $100 you have used $75, which is your outstanding balance. On the $200 card your balance is $125.
So your balance to available credit is ($125+$75)/($100+$200)x100% = 66.67%
Lets say you paid off the $100 credit card. Now your balance is $125. So that same percentage will now be
$125/($100+$200)=41.67%
If you now cancel the $100 card, your available credit become $200 only. However your balance is still $125. So the percentage becomes $125/$200=62.5%

As you can see your credit usage went up from 41.67% to 62.5%. This will hurt your credit score. Therefore if you pay up a card, don't cancel it. Just don't use it.

Answer 2

From what I understand, cancelling a credit card can put a mark on your record that some credit companies might find disturbing, but it should not affect the number score you have. If you decide to cancel a credit card, be sure that you ask the credit card company to show "per customer request" on the credit report at the reporting agency.

Also, as I understand it, to establish credit, you will need to carry a balance and make adequate payments for at least six months before the credit will show on your report.

Make sure you get a credit card with low interest and no annual fee if you want to use it to carry a balance and establish your credit.

Keep in mind that any debt you have might hinder your ability to get further credit for major purchases, such as automobiles or real estate, whether you have a high score or not.

Answer 3

Pay the bill first, and I would hold onto the card for another month, just to make sure that there is a zero balance on it. Kohl's has a way of adding charges to the card that you don't expect. As for canceling, it's not easy. Call the service number, and you can do it over the phone. You cannot do it at an actual store.

Answer 4

The Dark Knights answer is absolutly correct, further more the credit bureaus pay no mind to whether it was closed by the lender or consumer. If the card is in good standing keep it!!! In fact see if they'll increase your limit! You could improve your score by having more available credit. I'd give the 10pts to Dark Knight he hit it right on the head of the nail, though I won't complain if you send them my way!

Answer 5

I've been told that a credit card with a zero balance adds 25 points to your credit score... keep it....

Answer 6

Yes, but not right away. A few months of inactivity and you will lose the benefit to your credit that you had while you were actively using a credit card.

Answer 7

No although you would like to keep it open and use it sparingly. even though you pay the balance when you go to buy a house, mortgage lenders like to see a certain amount of balances, credit limits, and even length on account activiy. these things factor greatly to your chances for better rates. so if you get one, use it sparingly and keep payments on time or pay in full. and do not exceed 50% of the available limit. once you do that, then you score will start to go down