• Mya K

Closing Credit Cards

Updated: Sep 22, 2019

So, you’ve been paying off your credit card debt! You are feeling great! You are feeling accomplished! You’ve found your flow! You can only think of how terrible life has been in the credit card debt trap. But you are getting up and out of the trap and want to get rid of your debt once and for all. For some, closing the account could be detrimental depending on your overall goal, but for others it may be necessary.


You will read and hear that you should not close your credit cards after paying them off because it can “hurt your credit.” While this makes perfect sense to me, it may not be clear to everyone. As a matter of fact, it may seem contradictory to everything you’re being told. You may be thinking, “so you are telling me that I should get rid of my credit card debt, but you want me to keep the account open??” And for many, that answer is yes. Here’s why:


The diagram below shows you the 5 factors that make up your FICO score. Closing your credit card could have an impact on the 30% that is factored by amounts owed, 15% that is based on length of history, and/or the 10% for credit mix depending on what other types of account you have.

Closing your credit card will cause a drop in your FICO score because you’ve reduced your overall available credit where as before closing it, you had a greater percentage of available credit. The lower the percentage of used credit (not available credit), the better! The significance of that drop will depend on many other factors of your credit report. So there is no hard fast rule for if you should or shouldn’t close a credit card account. What you should know is closing the account will impact your FICO score. The magnitude of that impact varies.


Despite the effect on your FICO score, you really have to make this decision based on your money mindset, behavior, and overall goals. Have you done the work you need to do in order to not repeat the cycle of getting back into credit card debt? How many times have you tried to get out of credit card debt? What external influences prevented you from accomplishing this? Are those external factors still around? Are you working with someone to guide you on your journey to help hold you accountable?


If you’re still not sure if closing the account is the right move or not for you, you may want to work with me. In the meantime, you can always cut up the card and be done.


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