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Blogging for Change Blogging For Change
by Jesse Campbell on April 07, 2014

Will it hurt my credit to close this credit card?

Ask the Experts: Should I wait before I close this credit card?

I recently completed paying off my credit card debts (thanks to MMI!). I currently have 2 general credit cards - one is a card that I used to help rebuild my credit (it has an annual fee which they charge as $3/month and a high interest rate); the other one is a no-annual fee card with a decent interest rate.

My question is this - will it ding my credit to close the high interest card? If so, how long should I hang onto it and pay that $3/month fee until I can get rid of it? Thanks! -Darlene

Hi Darlene,

I’m glad to hear that you’ve completed your Debt Management Plan! That’s great! Congratulations! That’s no small feat.

Regarding your question, as we always tell consumers, the exact formula behind credit scores is proprietary, so there’s no way to be 100 percent certain how any action you take is going to impact your score. That said, we do know what information is factored into your score and, in general, what actions will have positive or negative consequences.

Length of credit history accounts for 15 percent of your score calculation in the FICO model. Having accounts that have been open for a long time is (generally) better for your score than having accounts that have been open only a short time. So when you close an account that you’ve had for a while, your score often (but not always) goes down.

Will it hurt your score to close the account with an annual fee and high APR? Probably. How much it hurts (or doesn’t) may be contingent on how long it’s been open; which is also to say that keeping it for a while longer only to ultimately cancel the card won’t necessarily lessen the blow when you do finally close the account.

My suggestion is to speak to the credit card company first and see if you can’t negotiate better terms for the card. If you’ve had it for a while and have used it well and wisely, they may be willing to help you out. If they aren’t willing or able to change the terms, shop around. It’s generally considered to be best to have 2 to 3 credit cards, so find another with favorable terms (before you close the bad card and take the potential credit hit).

Building strong credit takes time, but by clearing away your debt and making smart, informed decisions, it sounds like you’re well on your way! Congratulations again, and good luck!

Posted in:  Credit Cards, Credit Scores


john gregory carradine says:
April 07, 2016

I really enjoyed reading the article and comments. I am currently in a debt management program with MMI. I am making good progress. For example, back in 2013, I was a little over $16,000 in debt. Now, I am currently a little over $6,000 in debt. Amazing. Thanks, MMI.

M says:
April 10, 2014

Hi, I read your post. My suggestion would be to pay off any purchases you have made with the high interest card and file it, meaning, tuck it away for a while without closing it. Make a small purchase with it occasionally and then pay that purchase off, in full afterwards. This will ensure credit worthiness, you won't have to take hit for closing it and you will build a good credit reputation in the meantime.

Maureen M Smith says:
April 10, 2014

3 years ago my husband & I had to settle credit card debts and a short sale which we are riding out. Unfortunately I now have a school loan who keep reporting me derogatory even though I have worked out a payment plan with them (I set up automatic debit of $100./mo. but they said they will keep reporting me derogatory every month until I pay the balance in full. I cannot settle the account until July or August. How come they keep reporting me derogatory when I have set up automatic debit to pay the debt back? How come settlements remain on credit reports for 7 years? Is there a way to remove them before 7 years? My score is only 522 now by Experian when it was recently 588 and this school loan with a Collection Agency made it go down by 66 points a month ago and I cannot seem to get them to work with me, although they offered me a 50% settlement. Can I ask them to write me a letter or send something to the Credit Reporting Bureau Agencies to stop reporting me negative when I am paying by automatic debit? Equifax and Transunion have me at 569. Is there anyway to fix my credit score or will I have to ride out a lot of the KD's by 7 years? This is not fair! Can I find someone legally who can fix my credit score? I am willing to pay someone but legally to fix my financial status of what happened in the past. I have other credit cards and I have been paying them every month on time. How often do this credit reporting agencies report on your credit cards that you pay every month? How long does it take to get your credit score increased? Can I get this Collection's debt off my credit? Thanks!

Phillip Washburn says:
April 10, 2014

Will pulling your credit score to frequently have a serious negative effect on my credit score?

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