Can Closing a Department Store Card Raise a Credit Score?

Closing a store card won't immediately raise your credit score.

Closing a store card won't immediately raise your credit score.

There's no quick fix if you want to raise your credit score. It takes a combination of several factors, including your ability to pay your debts on time. According to the Fair Isaac Corporation, which created the FICO credit score, if you want to raise your credit score, closing a credit card account -- including a department store card -- isn't the right way to attack the problem.

Hurting Credit Utilization

Your credit utilization ratio compares your current debt balances to your available credit. Ratios over 30 percent typically hurt your credit score. For example, say you have three cards with a total credit limit of $5,000. If you have balances totaling $1,000, you're using 20 percent of your available credit. If you close a department store credit card with a credit limit of $2,000, that drops your available credit to $3,000 while your balances still total $1,000. This raises your credit utilization to 33 percent, which hurts your credit score.

Credit History Remains for a While

Even though you've closed an account, that doesn't make it disappear from your credit report. All the negative information from the account still docks your score for the same amount of time it would if you kept it open -- typically seven years. For example, if you missed three payments in the last year, those negatives are going to hurt your credit score for several more years whether the department store card gets closed tomorrow or you keep it open for the rest of your life. The only thing closing the card does it remove the positive credit information from your credit report in 10 years. If you leave the account open, the positive info would stay indefinitely.

Credit Mix

When it comes to credit utilization, the credit lines on your department store cards count the same as bank credit cards, so closing either one can be equally bad for your credit. In addition, by having both a department score card and a bank card, you can improve your credit mix, which contributes 10 percent of your credit score. If you do want to close a credit card account, however, you're better off closing the department store card than the bank card, says

Curbing Spending

Even though closing your department store card won't give an immediate boost to your credit score, that doesn't mean you need to keep it open forever. If you don't use it, but pay an annual fee, you might be better off closing it to save money. Similarly, if it's too much of a temptation for you to rack up purchases, closing it could also help you save money. By avoiding needless purchases, you can pay down your debt more quickly, which boosts your credit score.


About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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