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Pros and cons of cancelling an unused credit cardBelow we have summarised the main advantages and disadvantages of cancelling unused credit cards. We go into further detail later in the article, giving examples of when you should consider either cancelling or keeping your unused credit cards. Pros of cancelling an unused credit card
Cons of cancelling an unused credit card
Will my credit score go up if I cancel unused credit cards?No, not necessarily and, in fact, for some people it could go down. The key thing to consider is the reason for cancelling the card. If you've had 'problem debt' in the past (debt that you struggle to pay off) then it would be sensible to cancel any unused credit cards to ensure you don't give in to temptation. Even if your credit score is negatively impacted in the short term, it would quickly recover and is far better than building up debt that you will struggle to repay. If the only reason for cancelling the card is that you don't use it very often, then you may be better off keeping it, because cancelling the card would increase your overall credit utilisation and could leave you with a 'thin' credit file, negatively impacting your credit score. Below we have summarised when it may be sensible to cancel an unused credit card and when it may be best to keep it. When is it best to cancel an unused credit card?As a rough guide, it is better to cancel an unused credit card if:
When is it best to keep an unused credit card?As a rough guide, it is better to keep an unused credit card if:
What is the best way to cancel an unused credit card?Cancelling and closing down a credit card account is relatively straight forward, however, you should think carefully before you contact your card supplier. Before cancelling your unused credit card you should:
To cancel your unused credit card safely you should:
SummaryThere is no right or wrong answer and cancelling an unused credit card can impact your credit score both positively and negatively, depending on a number of factors. It is important to understand that you don’t just have one, universal credit score. Each credit reference agency uses their own system when compiling your score and lenders will look at a number of factors when assessing your creditworthiness. These can include:
If you are considering cancelling an unused credit card but are worried about the impact it will have on your credit score, then perhaps consider contacting the credit card provider and reducing the available credit limit. By reducing the credit card limit, you can see the impact that it has on your credit score without having to fully cancel the card. You can then choose to cancel the card at a later date. If you want to improve your credit score or are struggling with debt, you may find these articles useful:
This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish.AcceptReject Read More Is it better to cancel unused credit cards or keep them?It is better to keep unused credit cards open than to cancel them because even unused credit cards with a $0 balance will still report positive information to the credit bureaus each month. It is especially worthwhile to keep an unused credit card open when the account does not have an annual fee.
How do I close a credit card without hurting my credit?Consider the Timing and Impact on Your Credit. When you close a credit card, your credit score may be affected. ... . Pay Down the Balance. ... . Remember to Redeem Any Rewards. ... . Contact Your Bank to Cancel. ... . Don't Accept Their Offers. ... . Write a Letter for Your Records. ... . Check Your Credit Report to Ensure the Account Is Closed.. |