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Everyone wants to limit debt and improve wellbeing by having fewer credit cards open because of the increasing interest rates. However, before considering that, you should consider how closing a credit card could impact your credit score and credit history linked to the closed credit card.

Why close credit cards

If you have credit cards that you are not using, you can close them to reduce the number of accounts under your name. Even if the credit card has no balance, there might be unauthorized charges you should monitor; therefore, closing such cards will enable you to manage finances efficiently.

Also, if you are spending a lot of money, you should consider closing your credit card. This will give you control over your spending and prevent the urge for unplanned credit card spending. Equally, you can close the credit card as a form of damage control when you have a huge balance on it.

Similarly, there might be better credit cards with low-interest rates, so closing one charging higher rates is a sound decision. Sometimes a credit card will have a low limit, and then there is one with a higher limit and with reward programs, and closing a low limit credit card will be a good idea.

Does closing a credit card affect credit score?

It is important to note that closing a credit card might not be the only way of solving your financial issues. Although the benefits of credit card closing are much, such a decision doesn’t improve your credit score. Interestingly closing your credit card even if it’s one with a zero balance could hurt your score.

Even if you close your credit card, that doesn’t take it from your credit report, and the account remains on the report until after the expiry of the reporting time limit. According to the Fair Credit Reporting Act, bad history will be on your report for up to seven years. Also, the closing of your credit card account affects the credit utilization ratio, which will damage your score.