Saturday, December 5, 2009

When NOT TO Cancel a Credit Card

Article by Matthew Maillet

Making the decision to cancel a credit card has many associated risks that come along with it. For example, closing an account may hurt your credit score for up to two years. These repercussions can have lasting effects on your ability to access a loan, acquire financing, etc. With that said, there are many considerations to take into account before choosing to close an account.

If you are on the market for a substantial home or auto loan, it is most important for your credit score to be as strong as possible—every little detail counts when a lender is determining payments and length of the loan. Thus, refrain from closing an account until you have already been approved for the loan.

If you are struggling to boost a low credit score, you should avoid cancelling credit cards at all costs. “You particularly want to preserve your oldest and highest-limit accounts when you're in credit-improvement mode.” With that said, it is typically unwise to cancel a credit card with any credit score lower than 700. If closing your account is a desperate measure that is unavoidable, delay cancelling the account as long as possible. Wait until you are in the most stable position possible before you make the decision to cancel your account.

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