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November 11, 2013
Credit card scoreA lot of people have a lot of misconceptions about credit cards, particularly how they affect credit scores. It’s pretty well known that checking your credit score when you open a new card will drop your score slightly—but what about when you close one? Different people will tell you different things, because the truth is: It’s a little complicated. How your credit score will change with closing a credit card depends on a few different factors, which we’ve explained to help you maintain the best score possible.

The Simple Answer

Having a credit card helps your overall score, because diverse sources of credit works in your favor. That said, if you have multiple credit cards open and want to drop down to one or two, closing cards won’t help your credit score, and it won’t necessarily hurt either.

The Complicated Answer

More than the number of cards open, the percentage of your available credit affects your overall score. The general rule of thumb is to use no more than 30% of all available credit on all of your cards. So, if you owe $900, and have three cards with a total credit limit of $3,000, you’re right at the 30% line. If you close one of them before paying off some of the balance, you’ll go over that 30%, which will hurt your credit score. If you owe significantly less than 30% of your total available credit, closing a card won’t affect your credit score either way.

So What Should You Do?

If you need to raise your credit score, paying off enough balance to drop below that 30% line is the best way to do so with your credit cards. If you’re right around that line and want to consolidate your cards, pay off enough so that closing one or two won’t affect your score. Remember, credit cards are a good way to diversity your credit portfolio. If you’re in a good position with your available credit and balance ratio and wanting to apply for a loan soon, don’t stress about having multiple cards open. You can always consolidate after obtaining a mortgage.

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