Does canceling a credit card hurt your score?

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Canceling a credit card in Canada can lower your credit score by affecting credit utilization, history length, and credit mix. When you close a card, your total available credit drops, which could raise your utilization ratio if you carry balances. Shutting an old card reduces your account age, and losing a revolving account impacts your credit diversity. Keep these points in mind and reach out via phone, text, or live chat if you have any questions.

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Canceling A Credit Card Hurt Your Score Question

Does canceling a credit card hurt your score? I’m thinking about closing a credit card that I rarely use

From: Anonymous Question
Location: Saanich, British Columbia (BC)
Category: credit rebuilding

Canceling A Credit Card Hurt Your Score Answer

If you’re thinking about canceling a credit card, it’s essential to understand the potential impact on your credit score in Canada. Closing a card can affect your credit utilization, credit history length, and your overall mix of credit types. For instance, if you’re distributing $3,000 in spending across various cards, shutting one of them trims your overall limit. This change could crank up your utilization percentage, which may not do any favors for your score.

Moreover, if you’ve got a card with a bit of history under its belt and you decide to close it, this can shrink the average age of your credit accounts. Such a move might bring down your score, as credit history length is a significant player in determining your score. Lastly, the diversity in your credit types, like having a mix of revolving credit and installment loans, helps buoy your score. Closing a revolving account, such as a credit card, could narrow down this variety, which isn’t ideal if it’s the only one you’ve got.

From: Insider Adam

Office of the Superintendent of Bankruptcy (OSB) Answer

Closing a credit card can negatively impact your credit score, particularly if it reduces your overall credit limit or affects your credit utilization ratio. While the sources provided primarily focus on legislative and regulatory frameworks related to insolvency, they do not specifically address credit scoring factors. However, based on general credit scoring principles, it is advisable to consider the potential impact on your score before closing a credit card, especially if it is your only account with a long credit history.

From: OSB Helper

Related Questions to Canceling A Credit Card Hurt Your Score

Here are the top 5 most frequently asked questions related to the impact of canceling a credit card on your credit score, based on current trends and concerns:

1. How does canceling a credit card affect my credit utilization ratio?

Canceling a credit card can increase your credit utilization ratio, potentially lowering your credit score.

2. Will canceling a credit card shorten my credit history?

Yes, canceling a credit card, especially an older one, can shorten the average age of your credit accounts.

3. Can canceling a credit card impact my credit mix?

Yes, closing a credit card can reduce the diversity of your credit mix, which is a factor in your credit score.

4. How long does a closed credit card remain on my credit report?

A closed credit card can remain on your credit report for up to 10 years, depending on the payment history associated with the card.

5. Will my credit score recover after canceling a credit card?

Yes, your credit score can recover over time if you continue to use credit responsibly and make on-time payments on other accounts.

If you have a question about debt see our debt questions or ask your own debt related question.

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