Does Cancelling your credit cards hurts your credit score
if you really don’t want to hurt your score, do not apply for too many credit cards or credit checks. Too many inquiries into your credit history will damage your score. Also, do not default on payments because you can lose 100+ points for even 1 single late payment.
Logically, you should keep the cards with a higher credit limit because it shows that you are credit-worthy and your debt-credit ratio is lower (that is good for your credit score) but if they are all new cards I would keep the oldest or a few older ones around.
Do you have any balances on the cards? If so, move the balances to the cards with the lowest interest rate and cancel the higher ones.keep the cards with lower interest rate to minimize your monthly payment. However, if you are interested in putting in some work to improve your credit score, you need to do a couple of things before you figure out which to cancel.
1. Get your credit report from Equifax, Experian and Transunion (not just your FICO score). They will have the credit card’s payment history on them, going back as far as two years (if you don’t have any serious delinquency like bankrupcy and default). Write down the list of cards for which you have full two year of payment history, and note if there any late payments and how many delinquencies.
2. Check each of your credit card statements and figure out how much you need to pay for your daily necessities like bills and food and how much money you usually “splash”. Write the average amount for both down.
Finally, based on how much you spend per month you need to determine what cards you’d keep. Let’s say you spend $3000 on necessities, and $3000 on ’splash’, you might then want to keep a total of $20,000 credit (the amount will change depending on your actual spending pattern). This combination will keep your debt level at about 15% (and it gets to 30% if you splash, but still not terrible) of total credit and give you a higher score. And when you determine which cards to keep for the $20,000 total, try to select cards with longer, healthier payment history.
Rule of thumb:
1. You don’t want to have a high % of debt to credit
2. You don’t want too much credit (that increases your chance of default by the current rating system and decreases your score)
3. Smaller credit is sometimes better as you might get more favorable interest charged on them compared to a larger credit, for the same reason of increased chance of default.
