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December 05, 2011

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Both my husband and I each open and close a few cards a year, for the bonus rewards. The last time I checked, not too long ago, my credit score was above 800. Not only that but we don't expect to borrow money in the future.

Wow! I definitely assumed that closing credit accounts would cause a more substantial impact to the credit score. Interesting information. 40 credit cards though? Is that a little excessive? Well the guy is traveling like a king with all the point haha! Have a great day everyone!

Good to know. there is a credit card I have been meaning to close.

This is good to know and something I thought about while reviewing my credit karma account.

Something I have not figured out is how credit utilization affects my credit score. I was giving a 'C' rating on credit karma even though my utilization is at 0%.

From what I see on the website, your credit score is negatively affected if you do not have a 1 - 20% utilization rate?

I charge everything on my card if possible but I have a total available credit card limit on all my cards of over $81,000... should I start cancelling cards I do not use in order to get my limit down and my utilization up?

Any help is appreciated!

I agree that people shouldn't be so paranoid about closing a card.

The exact hit to your credit score will depend on the exact situation. I bet the exact hit of closing 1 card will differ if you've got 2 cards versus 12 cards.

If you have a balance on any cards that you carry then closing a card could have a different and larger impact. Closing 1 of multiple cards would lower your credit limit and impact your credit utilization % rate. SO if you carry any balance then closing a card could have more impact.

Brent, having 0 debt will not have any negative impact on your credit score. NO you don't want to cancel cards to decrease your limit and increase utilization, that would hurt your score.

You say you charge everything possible? That means that at any given time you may have a balance on your cards for that month which you will then pay off when you get the bill right? My understanding is the credit scoring mechanism may see that current balance and then score you negatively. They don't know if that money will get paid off or if its been carried for months. So they treat it like a debt.

Jim, thanks for the response. I looked into it a little further and it looks like Chase (the card I use to pay for everything and pay off monthly)is not reporting my limit so it makes me look like I have 0% utilization and that is not good according to Credit Karma.

After looking at Credit Karma's Q&A, they mention that Credit companies like to see at least some utilization between 1-20%.

This seems backwards to me but is what is causing me to not achieve an even better credit score.

Wouldn't the impact on your credit score also depend on how long you have had the accounts open before you close them? In other words, I would think that closing an account that you have had open for a year or so would have a smaller impact than closing an account that you have had open for 15+ years. Isn't average length of accounts a factor in determining your credit score?

I think a ton of people have the misconception that closing an account will damage your credit. I had a discussion with the guys @ Creditnet.com and closing an account (regardless if you do it or the creditor does it) has a negligible impact on your credit score.

Great to know it's not a big hit. When I pay off my credit cards, I may close 1 or 2, especially if the limit/interest rate don't align with my goals anymore. One I know I'll be closing is my Goodyear credit card I was encouraged into opening last year for car repairs. One of the biggest financial mistakes I've ever made.

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