How to close a credit card without damaging your credit rating

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If you want to avoid high annual fees, limit your expenses or simplify your financial life, all you have to do is cancel your credit card. This process requires more than just closing it and throwing it out if you do not want to lower your credit rating because of it.

Cancellation of a credit card may adversely affect the rating, but the portal Go Banking Rates told how to reduce damage to a minimum.

Tips for canceling a credit card

In order to avoid negative consequences, carefully choose the time to cancel your credit card. For example, if you plan to apply for a large loan in the next few months, it is better to cancel the credit card after approving the application.

Fully repay the credit balance on the card before closing it. If you close it when there is a balance in your account, it will still be displayed in your credit report. If you must continue to make monthly payments, consider not closing the card until you have fully repaid the debt. Thus, your credit report will show the timeliness of payments before you pay off the balance. Alternatively, you can transfer the balance of the debt to the credit card that will be opened.

Be sure to request information.

Make sure you pay off all payments or penalties before closing the card. In addition, call the credit card company to find out exactly how the card is closed according to the rules of the company.

Many such companies offer you an additional bonus or other incentive that will force you to change your mind about closing the card. Some sentences are very convincing.

“It's best to call and close the account and check with the person who is closing the account for you,” said Tracy Becker, CEO and president of North Shore Advisory. “You should request confirmation that the account is closed, along with confirmation that you do not have any debt.”

After closing a credit card, check your credit report to make sure the card is closed. Be patient. This process may take a month or even more. You can also request a free credit report from each of the 3 credit bureaus—Equifax, Experian and TransUnion—once a year through AnnualCreditReport.com.

What credit card to close

If you decide to close one of the credit cards, think about how each of them can affect your credit score.

For example, 15 points of your credit rating are based on the length of your credit history, so if you want to cancel your old credit card, it will eventually lower your rating.

You also should not close the card with the largest credit limit. Consider which cards have the best conditions.

For example, you may want to cancel a card with the highest annual fee, but you should make sure that the bonuses do not cover your fee.

If you check the card balance every month, you probably don’t want to cancel the card with the lowest interest rate.

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