Canceling a credit card will affect your credit score. The effects may be negative or positive depending on how long an account has been open, how much total debt there is and how many credit cards are canceled in a short amount of time. It's important to check your credit score after canceling a credit card to ensure credit reporting accuracy.
Benefits
Having many high-balance credit cards near or at their limit will lower your credit rating. Having too many open lines of credit with or without balances will also negatively affect your credit score. Under these circumstances it may be beneficial to cancel a line of credit.
Balances
Canceling a credit card after paying it off may hurt your credit score if other lines of credit have high balances. Canceling a credit card may lower your available credit-to-debt ratio, effectively raising tour lending risk factor.
Credit History
Your credit score factors in your entire credit history. Canceling older credit cards or lines of credit in good standing may alter the credit history unfavorably. A long credit history is beneficial, and canceling an older credit card changes the average age of your credit history.
Time Frame
Canceling too many credit cards in a short period of time will hurt your credit rating. This may indicate financial trouble to potential lenders. Canceling one credit card every six months is a better alternative.
Credit Report Accuracy
Individuals should make sure that their credit report states that they closed the account, not the lender. It lowers a credit rating when a lender closes the account. When canceling a credit card, it's best to get it in writing that the account was closed willingly.
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