Most of us have cancelled one or more of our credit cards over the years. We all have our reasons for doing this, but many times we don’t consider what effect, if any, this will have on our credit score.
According to Adam Baker who blogs about living debt free at his blog Man vs. Debt, he canceled all his credit cards and his credit score dropped only 10 points. Through the process he learned a lot about the score and what credit providers are looking for.
He has shared the following points about what living existing without credit cards might do to his score, over time:
- The length of our active accounts would obviously be affected. Several of our credit cards were 4-5 years old. Canceling them reset the length of our active revolving loans back to zero.
- The type of credit used would be less diverse. We didn’t have a mortgage and now didn’t have any active revolving credit, either. I’ve read that FICO likes to see an installment loan that isn’t a student loan (for example, an auto, jewelry, or personal loan). We’re now lacking that, as well.
- Our overall credit limits were all but eliminated. Previously, we had close to $15,000 in credit card limits. This was obviously reduced to $0 by closing the accounts.
You can read more about How Much Does Canceling Credit Cards Affect Your Credit Score? from the Get Rich Slowly blog.
Do you have some experience with cancelling credit cards and how it impacted your score? If so, share your stories in the comments.
