Credit scores can be maintained even after cancelling credit cards

Cancelling excess credit cards to keep one’s consumer debt under control is a good call, but how this is going to affect his/her credit score is a bit tricky.

Apparently, credit scores aren’t an exact science. Credit scores tend to vary from one credit score model to another. In fact, you don’t have only one credit score, as most people think. There are different credit score models in use and each model gives a different score, though it doesn’t differ that much. The various scoring models don’t even follow the same range, but the most commonly used credit score in FICO credit score, which ranges between 300 and 850.

Cancelling a credit card may lower your credit score by a few points, but this isn’t that concerning unless if you are applying for more credit or a mortgage. However, to get a mortgage at favorable interest rates, a good credit score is downright important. So, if your credit score is 730, a lender may forward their best rates, though for most mortgagees, credit scores of 740 or more won’t make that much of a difference, unless your credit score is 780 or 790, then you can have the best interest rates.

If you are applying for a mortgage loan, don’t cancel your credit card until you get that loan. As you possibly know, closing a credit account affects both your debt-to-credit ratio and your credit score if the credit card you are going to cancel is the oldest one, because length of your credit history is taken into account when calculating your score. So, keep that in mind in deciding which card you will close. However, a new credit card becomes an old too eventually, if you don’t cancelling cards frequently.

The best approach to improve both your finances and credit scores in the long run is to keep your credit utilization ratio to zero. With one less card, plan to pay off the debt of other cards.

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