{"id":1879,"date":"2021-09-10T13:26:21","date_gmt":"2021-09-10T17:26:21","guid":{"rendered":"https:\/\/www.skypointfcu.com\/wph\/workarea\/?p=1879"},"modified":"2021-09-10T13:26:36","modified_gmt":"2021-09-10T17:26:36","slug":"ditching-credit-cards-heres-what-could-happen-to-your-score","status":"publish","type":"post","link":"https:\/\/www.skypointfcu.com\/wph\/workarea\/blog\/ditching-credit-cards-heres-what-could-happen-to-your-score\/","title":{"rendered":"Ditching Credit Cards? Here\u2019s What Could Happen to Your Score"},"content":{"rendered":"\n

Ditching Credit Cards? Here\u2019s What Could Happen to Your Score<\/strong><\/p>\n\n\n\n

Maybe you\u2019ve been ordering too much stuff on Amazon or watching your bank account shrink after spring break travel.<\/p>\n\n\n\n

When your spending spins out of control, one way to rejuvenate your finances is to go on a financial fast. But while chopping up your credit cards may feel cleansing, you might be surprised at what it could do to your credit score.<\/p>\n\n\n\n

Here\u2019s how to think about whether to cut them up, or simply cut back.<\/p>\n\n\n\n

Cutting up your cards but not closing them<\/strong><\/h3>\n\n\n\n

If you stop using your cards \u2014 whether you dice them up or put them in the freezer \u2014 but keep the credit accounts open, your score will go up, says John Ulzheimer, a credit expert who has worked for credit bureau Equifax and credit scoring company FICO.<\/p>\n\n\n\n

\u201cThe primary reason you want to keep your card open is because your score benefits from the unused credit limit,\u201d he says.<\/p>\n\n\n\n

Credit scores are heavily influenced by how much of your available credit you use<\/a>. When you stop charging purchases to your cards, the balances you\u2019re carrying will go down with each payment you make. Ideally, experts recommend using no more than 30% of your credit limit on any card, and lower is better.<\/p>\n\n\n\n

However, once you\u2019ve paid the balance down to zero and stopped using the card completely, issuers may lower your credit limits or close your accounts if there\u2019s no activity on them. How long it takes depends on the issuer, Ulzheimer says.<\/p>\n\n\n\n

\u201cSome of them will start to reduce credit limits after 12 months of inactivity,\u201d he says. \u201cSome card issuers will let you go years before they do anything.\u201d<\/p>\n\n\n\n

To prevent your accounts from being closed, charge a small purchase to your card every now and then and pay it off promptly, Ulzheimer says.<\/p>\n\n\n\n

Closing your credit card accounts<\/strong><\/h3>\n\n\n\n

If you take the more serious step of closing your accounts, your score is likely to drop in the short term. The reason is the same as before: Credit scores are influenced by how high your balance is compared with your available credit.<\/p>\n\n\n\n

Closing an account lowers your overall credit limit (or eliminates all of it if you have only one card). Now, even if you\u2019re carrying the same balance, it represents a bigger chunk of your remaining credit, which could cause a drop in your score.<\/p>\n\n\n\n

\u201cUnless you\u2019ve got some punitive annual fee on a card, I can\u2019t think of a reason to close it,\u201d Ulzheimer says. You may want to go on a spending fast right now, but your score will matter if you apply for a loan or credit card down the road, he says.<\/p>\n\n\n\n

A credit card can also be useful in case of emergencies. Pair it with a decent emergency fund <\/a>so you can pay the balance back down as soon as possible.<\/p>\n\n\n\n

Turn your spending fast into a healthy diet<\/strong><\/h3>\n\n\n\n

A fast is a temporary measure. To keep your spending under control long-term, start tracking your cash flow, says Daniel Milks, a certified financial planner and founder of Woodmark Wealth Management in Greenville, South Carolina.<\/p>\n\n\n\n

\u201cFigure out where your money is going and where it\u2019s coming in,\u201d he says. \u201cThe more you know about yourself and what you\u2019re spending on, the more equipped you are to control it.\u201d<\/p>\n\n\n\n

Armed with that knowledge, you can build a budget that helps you cut back on expenses and save for bigger goals, like paying off debt or saving for a down payment.<\/p>\n\n\n\n

More From NerdWallet<\/strong><\/p>\n\n\n\n