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Credit Repair

2 Reasons To Never Close A Credit Card Account

Many savvy consumers are trying to reduce their dependence on credit cards. This is an admirable effort that will have long term effects on their financial stability. Paying down or paying off credit card debt brings up an interesting question that many may not have thought about, what to do when they are paid off? Here are a few reasons that you should never close a credit card account. Each of these reasons is solely based on your credit score.

  1. First, a portion (about 15%) of your credit score is based on the length of your credit history. Close an account and that history just shortened, thus reducing your credit score.
  2. Second, another 30% of your credit score is based on your credit utilization ratio. This is the amount of money borrowed compared to the credit limits that you have. If you have a $2,500 limit and no debt, your score will be higher. Close an account and that ratio drops along with your overall credit score.

Paying off your credit cards and lowering your overall debt load is still the best thing that you can do in terms of legal credit repair. Closing old accounts without considering all of the possible implications could be somewhat irresponsible. Carefully weigh the costs of keeping old accounts open against the chance of a lower credit score.

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