I closed about 15 accounts and you are about to see exactly what has happened to my credit score in just a moment. The main reason people ask If it’s okay to close accounts is because they get worried about their credit score.
I have also frozen my TransUnion, Equifax, and even my Experian accounts. No new lines of credit can be opened in my name, and no credit cards exist to report anything.
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1. The negative effect of closing a credit card
Utilization Ratio may change:
- This is the percentage of credit you are using, compared to how much you have been giving
For example, I give you a credit line of $500 and Chase gives you another of $500
- Right now you are using about $300 and have a utilization of 30% because you are only using 30%
- But you close me out, and now you only have chase with $500, your utilization goes up to 60% which not good
- You usually want this below 10% anyways
Reduced your credit Length
- Closing your oldest card can lower your length which is about 15% of your score
Your credit mix
- They want to know if you can handle different types of debt
Access to Capital
- Once you close that’s it, you can't borrow that money anymore
Truth is this: if you were using a product that you no longer cared about, like Tmobile for example ( and they tell you this)
- If you cancel yes you'll save $100 with another company
- But no more international roaming
- No more free Netflix
- Not more tmobile Tuesday
- Your response would be, who cares
2. What people tell you
- If it doesn’t have an annual fee then just keep open
- So your credit score can stay as high as possible
- But again credit scores don’t matter
3. Credit score
Truth is: We say we need credit to buy things ( but what are those things really )
- House: Manuel underwriting ( that simple )
- Car: if you need a car and you don’t have money ( but something used, cheap, and reliable
- Stuff: save up or don’t buy ( those are options, you don’t have to get whatever you want, just because you can swipe a card )
4. My advice
- If you don’t want to play the credit game anymore
- I would close it out and call it a day
- Focus on building real wealth
In conclusion:
- If you care about credit, it’ll hurt it
- If you don’t, it doesn’t matter
- Don’t close things out, if you are shopping for a mortgage at this current moment ( wait until that’s done and then close it out )
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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I'm an Accountant but I'm not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.
20 авг 2024
