Avoid Debt – Advice on avoiding debt & bad credit issues

Closing credit cards to get a higher credit score could impact your FICO score negatively

April 3, 2013 by · Leave a Comment 

We know that several factors can affect your credit score. Among them your payment history, balances, type of credit, and inquiries on your credit accounts are important. Many believe that having a balance on each credit card help to get a good score and others think that closing credit cards help increase the FICO score. Let’s dig a little deeper into these two.

How outstanding balance to total credit line can affect your score

Let’s say that you have a credit card with a credit limit of $35,000 and a balance you owe of $5,000. The ratio, credit to outstanding balance, in this case will help you to get a good score. On the other hand, situation could be different with a credit card with a total credit limit of $6,000 and with an outstanding balance of $5,000. Here the ratio of the credit limit to outstanding balance is not healthy from a credit score point of view and therefore, lead to a lower credit score.

Closing credit cards to improve your score

Closing credit cards even you don’t owe anything on those cards could lead to a lower score. Closing credit cards lowers your available credit.