Do you have a credit card that you no longer use and are wondering if you should cancel it or not? Before you do, it is important to understand the complete impact it may have on your current and future credit.
Here are four things to take into consideration:
- Your credit score takes into account your average length of credit as well as what is known as utilization or your credit card balance in relation to your available credit—canceling it could have an impact on your credit score at least in the short term.
- If you plan to apply for a loan in the near future, it is best that you do not cancel the card as this may impact your credit rating.
- If your card has annual fees, ask the financial institution if they can put you on another program that does not have the fees.
- To avoid your financial institution canceling your card due to inactivity, make sure to use your card periodically for small purchases—just make sure to pay it off in full to avoid finance charges.
For more information on debit and credit, visit the Education and Resources section of www.becu.org.