While cancelling a credit card does not, in itself, have anything to do with your credit score, it can impact it in 3 ways which you should consider before doing so

The impact on your credit score (in order of importance):

1 – Credit utilization can be impacted.

Supposed you have total credit of 30,000 and have a credit balance of 3,000. That’s 10% utilization which is deemed good by most creditors. Now, if you have a 20,000 limit card that you cancel leaving you with 10,000 of credit, suddenly credit utilization jumps to 30% and that can have a significant impact on your credit score even though the amount of debt never changed. You always want to try to keep credit utilization on any card and in total under 10% to maximize your score.

2 – Length of credit can be impacted

Your credit score considers your length of credit. The longer the better. So if you have been carrying around that card you want to cancel for 20 years, cancelling it may significantly reduce your overall length of credit and impact your score. Thus, if you have an account that has been open a very long time, it is best to keep it open unless there is a good reason for closing it.

3 – Variety of credit can be impacted

Your credit score and lenders consider the types of credit you have and a variety is considered a good thing. So having that odd department store credit card that you applied for on a special promotion isn’t a bad thing and can help out your score. While you may never use the card anymore, you should think twice before cancelling if it adds to your overall credit mix.

Many people reach a point where they want to limit or consolidate their credit cards and there is nothing wrong with that. However, it is important to know the impact it may have on your credit score at least in the near term.