After you pay off a credit card, does cancelling the card hurt your credit?

Question

My credit limit on my current card is only $300. I want to open a card without a different company. Once I pay it off, will cancelling hurt my credit?

Answer 1

YES. This is because part of your credit score is comprised of factors such as "Types of credit," "Length of credit history" and "Debt to credit limit ratio." If you pay off a card to 0 and leave it open, that is the best bet because then your debt-to-credit limit ratio will be 0%, which helps you to have a better score.

Also, "length of credit history" plays a role. The longer you've had credit accounts, the better your score will be. Closing an account reduces the average age for your other credit accounts, unless your $300 card is fairly new(opened within the last 6 months) and you have other cards that have been open longer.

Lastly, the credit score looks at "types of credit." It is good to have a well-rounded variety of credit, ranging from credit cards to store cards to auto loans to mortgages to personal loans. If this $300 card is your only credit card, then odds are your score will go down because you will not have another credit card to substantially replace the $300 one.

So don't close the account...pay it off then leave it open. Unless it's one of those rip-off cards that charges and arma nd a leg in annual fees. Or unless you have tons of older credit cards with larger, better-established credit limits.

Answer 2

actually by canelling the credit card you will harm your score because it will show up as if you couldnt handle the credit line.. for most cases it is best to have 3 sources of revolving credit (either active or not) so having some credit lines open will help you prove that you can manage debt and so therefore your score will be higher by a few points. You can also ask the current credit card company for a limit increase but alot of companies will give you and automatic line increase by on time paymenst and frequint use.

Answer 3

I would advise against cancelling it, if you pay it off and cut the card up then you will have shown that you can manage your available credit which is more appealing to new creditors. If you cancel it, then you will have $300.00 less in availble credit which ultimately hurts your score! But cut the card up so you can't use it. That is what I did with one of my cards. Every month my Gym membership is charged to this card, and I pay it online so that the card shows activity. Good Luck!!

Answer 4

It can, considering the fact that 15% of your score is comprised of the length of history that you have. Let's say that you've had that card for a year or two and you cancel it, then that payment history is GONE, which would shorten your credit history. Acutally, you could use your credit card as leverage to bargain for a lower interest rate or even a higher credit line.

Answer 5

It wont lower your score alot, but it will limit your credit history. And in a sense that will make it harder to raise your score in the future.

The best thing to do is keep it open, maybe put a tank of gas or two per month on it and then just it down.

Answer 6

No, of corse not! But paying off the card you have &, applying for a new car will help you in getting the new card. Don't cancel the old card till you get the new one!

Answer 7

DON'T CLOSE THE ACCOUNT!!! Pay it in full if you want but don't close the account. 35% of the credit is affected for the credit history. if you have an open account since 00 with no lates will give you more points(credit) than a closed account!!!

Answer 8

It can. Wait awhile before you cancel it. It can actually benefit your FICO to have a zero balance CC account. Just cut up your card so you don't use it.

Answer 9

No it actually should help it because you paid off a bill.