Closing a credit card account with zero balance
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Can someone pls explain why closing a credit card account with zero balance on it is bad for your credit score?
Re: Closing a credit card account with zero balance
Here is what Fair Isaac (the company that invented FICO) has to say about it:How changes in “available credit” can affect FICO scores?
If everything else remains the same, we would expect that a reduction in available revolving credit (or the closure of a revolving account) will either have no impact on the person’s FICO score or will cause it to decrease.
Translation: FICO sums up all your credit cards’ credit limit and balance. The combined balance is divided by the combined credit limit, which yield your credit utilization.
The higher your utilization is the lower your score is.
In other words, closing an account with zero balance reduces the total available credit without reducing the total balance, so it increases the apparent utilization and lowers the score.
B.T.W., Fair Isaac doesn’t seem to think it’s a big deal. Their really short version seems to be something like: “Yeah, some people’s scores will drop a little, but not many, and even if they do, not by much and not for long.”
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