How to Effectively Open and Close Accounts without Lowering Your Credit Score

One of the many ways you can get a bad credit rating is by having multiple credit card accounts. Having too many plastic cards may tempt you to spend what you don’t have and promotes the notion that you can afford anything. And while you might be happy when shopping, you’re miserable when the time comes to pay your credit card debts.

The quickest way out of this bad credit situation is to reduce the number of credit card accounts you have. But before you rummage through your purse and start cutting up cards, you should know that there is a proper way to do it. If you cut up the wrong credit cards, you could get more bad credit than you ever expected. Follow these steps as a guide.

First, prioritize your oldest credit cards. They are favorably reflected in your credit history and if you have paid them off in a timely manner for the past years, they’ll make you look good to any money lenders. If you have an old credit card lying securely somewhere in case of an emergency, it is time dust it off and use it again.

Dormant accounts can hurt your credit score so don’t make that mistake again. If you want to keep a card for emergencies, use it minimally each month and pay the charges right away.

The best credit card accounts to close are the newly opened ones because it won’t hurt your credit score as much. Try to refrain from opening new accounts too often as this tends to affect your credit score negatively. Each time you open an account, creditors will perform a credit check inquiry and each inquiry lowers your score several points.

Keep in mind the credit utilization ratio when you close any account. This is the percentage gap of your outstanding balance versus your available credit. You should maintain no less than a 30% gap between the two to have a good credit score.

However, when you close an account, your available credit significantly decreases, making your credit-to-debt ratio narrower as well. Prevent this from happening by making adjustments to your outstanding balance and paying down a significant amount of your debt before you close the account.

These tips will help deliver a smoother transition from having multiple credit cards to a smaller more manageable number.