Does closing a credit card raise fico score?

[Gary]

My FICO score is less than 600. I have 4 credit cards. I plan to apply for a car loan in two months, and I need to raise my FICO score if I want to be approved and get good terms.

I want to close a credit card or two. Is this a good idea? Will it raise fico score?

Thank you for your advice.

[Anna]

It depends…

That depends which credit card you close. You could be closing your oldest form of credit. Since “Length of Credit History” accounts for 15% of your fico score, this can actually lower your credit score. It won’t be severe, but it will not raise your score.

Only close it if you feel that you cannot handle too many credit cards, or if you don’t use it too much but pay annual fee on it.

Credit score wise – it’s never worth paying annual fee just to keep the card. The only exception is when you start building your credit and you don’t have other options.

[Tracy Winters]

It won’t raise your fico score

Canceling the credit card, in itself, won’t hurt your FICO score. Closed accounts in good standing remain on your credit report for at least 10 years. They just don’t count as much as open, active accounts.

However, your score could go down because of two side effects:

Increased Credit Utilization
Closing an open account lowers your overall available credit limit, which could cause your overall credit utilization (that’s the ration between your credit balance to your credit limit) to go above 35%, which would lower your score.

If, AFTER canceling the card your credit balance is still low enough then this is not an issue. However, if you DO carry balances on other cards, this may affect your score.

Credit File Age
Closing an account has two effects:

• Closing your OLDEST account will make your credit file age younger, because your file age is determined by the oldest “Open Date” of your accounts.
• Closing ANY OLD account will lower the average age of your accounts which can also lower your score. If the account you plane to close is less than 4 years older than your other accounts, then the effect be very minor.

In order for any account to build and improve your credit, you need to actually use it on a regular basis. Unused cards sitting the sock drawer do nothing to help your credit and are real potentials for problems with ID theft and fraud.

Whatever you decide, if you cancel a card – close it via letter and request written confirmation that the account is closed and 0 balance. Keep that confirmation forever.

[Author]

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