Do you have a credit card that you’re no longer using and want to cancel it? Will this have an impact on your credit score? This is one of the questions that many Canadians ask to determine the impact such actions have on their perceived credit worthiness. Cancelling your credit card can impact your financial situation and you may need to seek credit repair Toronto get back on your feet. But there could be valid reasons to cancel certain credit cards. For instance, you might have found a better credit card with lower interest or terms that best suit you. It could be that you have made a conscious decision to stop relying on credit and work towards securing a better financial future. However, keep the following factors in mind when cancelling credit cards.
Credit cards allow you to build your credit history. For instance, if you have multiple cards and want to cancel out some, opt for the newest one. Holding on to the older credit cards that you have used for a longer time will enable you to avoid losing your credit history that has an impact on your credit score. Your credit card history will remain in your report for 10 years so this doesn’t mean that when you cancel the card, the score will go down instantly. However, the card won’t matter anymore 10 years later so you’ll lose the credit history that would have helped to increase your score. Think about your future when you want to get rid of an old credit card that has an impact on your credit history.
Some credit cards will cost you a lot of money to actually keep. In this case, it makes sense to get rid of the card. You may consider other incentives such as points that you may be accumulating while using the credit card. But are these points useful to you? These points are never worth the cost if you are being charged high yearly fees on these cards. Should you decide to cancel some credit cards that have a reward system, make sure you first use up the rewards and then cancel. At the end of the day, you don’t want to waste the points you had accumulated by cancelling the credit card.
Credit utilization ratio is simply described as the amount of credit that is made available to you compared to the actual amount you use. A suitable credit utilization ratio is 30% or less. This means that if you have multiple cards with different limits and you don’t use half of the amount that is made available to you on each card, your utilization ration will be much lower than someone who has a single card. Credit utilization is one of the main factors that will have a direct impact on your credit score. If it’s too high, your score may negatively affected because it shows lenders that you might have a problem managing your finances.