Does Canceling Charge Cards After a Zero Balance Ruin Your Credit?

Closing all your charge cards can impact your credit.
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So, you've paid off your credit card balances. If you cancel your cards now, you won't be tempted to use them again. It's one way to control your spending. Prospective employers, prospective landlords, insurance companies and utilities all check your credit score to determine their risk when dealing with you. Although it may not ruin your credit, there are several reasons why canceling charge cards can lower your credit score.

Debt-to-Credit Ratio

The amount of your debt determines 30 percent of your credit score, according to the website myFICO. A very low or zero balance on all cards results in very low use of your available credit. However, if you cancel your charge account, you lower your available credit. Any outstanding balances then become a greater percentage of your available credit.

Credit History

Closing a charge card with good payment history is a mistake. Your payment history makes up 35 percent of your credit score. A card that has remained in good standing for many years helps prove you're responsible with credit. If you keep that card open, the good history will show for many years. If you cancel the card, you can lose that information after 10 years, or earlier if the lender stops reporting it. Closing a card with bad information does not eliminate the negative history. It can remain on your credit report for up to 10 years. If you choose to keep only one or two cards, it is best to keep the oldest ones to maintain your history.

Types of Credit

The types of credit you have contribute 10 percent to your credit score. If you show you can manage payments on a variety of loans, like a mortgage, an auto loan and credit cards, you increase your score. If you cancel all of your charge cards, you eliminate one type of credit account. That can lower your score.

Your Own Charge Card

If you and your spouse or partner share charge accounts, the activity shows on the credit report of the person in whose name is on the account. You must maintain a credit history in your own name. If you cancel the only card in your name, you can lower your credit score. If you try to get a mortgage or auto loan together, the lender will look at both of your scores to make a decision.

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