Major Business Credit Reporting Agencies
2010
Closing out a credit card account, good thing or bad?
After 33 years having an account with a major retail store, I have decided to close that account and its Master Card account because of their inability to communicate and total lack of common sense. They no longer deserve my business. Some say closing such accounts can negatively effect ones credit and I am not sure why. I will instruct that when I destroy the card and close the account I expect them to notify the credit reporting agencies and give them the specific reason I gave for closing them. Any thoughts on such an action?
The card issuer will likely notate that your account was closed by account holder, which will not reflect negatively on your credit history.
There are two possible ways it might affect your credit score, both of which are temporary.
First, if this account was an older account than some of your other credit card accounts, closing it will shorten the length of your credit history. That can lower your score by a few points, depending on the number and age of your other accounts.
Second, closing an account can increase your credit utilization ratio, meaning the percentage of debt you have compared to your total credit limits.
You can restore your credit utilization ratio to its former level by applying for a new credit card account and/or asking for credit limit increases on your other credit card accounts.
The length of credit history issue will eventually resolve itself.
I personally believe that having too many credit card accounts is risky because of the threat of identity theft. So, I don’t go along with the prevailing wisdom that one should never close a credit card account. As long as you pay attention to the utilization ratio, you can still manage to maintain an excellent credit score and history.
CIBC doing small businesses a major disservice – report
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