Reader David said he called Discover Card to cancel his account — but was advised against it because canceling credit cards can hurt your credit score. He wants to know if it’s true.
I got a new Discover card in the mail this weekend and immediately called to cancel it since I try and not use credit cards in the current economic climate. While they didn’t give me a particular hard time, she did say that by canceling my card it could have an adverse effect on my credit rating (which is excellent): she said it is generated by looking at your oldest card average and your youngest card average blah blah blah. Their card was my youngest btw and used once or twice years ago. Is this true, or was she just attempting to convince me that I should not get a new card and transfer the balance (something I wasn’t doing)?
Well, it’s hard to know if what she said was exactly true with the “blah, blahs,” but it’s very true that canceling a credit card account can lower your FICO score. There are two important ways in which your score can be affected by the cancellation of an account.
1) Your available credit — that’s the credit that you are not currently using — may decrease. This may have a negative effect on your score.
2) Your credit history may be shortened. Length of credit history is part of your score. The older, the better.
Now, here’s the bigger question — should you worry about this? Should you tear your hair out and try to get on the Dr. Phil show? Nah. But unless you have a spending problem, it wouldn’t have been a bad idea to keep a credit account such as this open. Use it occasionally and pay off the balance in full.