Will My Credit Score Hurt If I Pay Off And Close My Credit Card?

Does paying off and closing a credit card hurt your credit score? That’s a two-part question. The answer to the first one is no, it helps, and the answer to the second is yes, closing your credit card hurts your credit score. Credit bureau Exerpian’s “Ask Max” says,

For example, if you have two credit cards, each with a $5,000 limit, you have a total credit limit of $10,000. If you have a $4,000 balance on one card, your utilization rate is 40 percent. If you close one of those cards, your total limit drops to $5,000 and your utilization rises to 80 percent. That can have a negative impact on your credit scores.

I once talked to a guy, a father and successful architect, who was proudly recounting how he had closed down all these credit cards to punish them after they said they would mail him some things in writing but never did. I told him that while that might have felt like he was “getting them back” somehow, it was really only damaging his credit score. “Maybe that’s why your credit score is lower than mine,” his wife said to him innocently. His face began to contort with suppressed rage, like the surface of a lake after a fish jumps.

THE EFFECT ON CREDIT SCORES OF PAYING OFF AND CLOSING CREDIT CARDS [Ask Max] (Photo: Rev Dan Catt)