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Should I close old credit cards?
Having numerous old credit cards open at once may hinder your chances of being accepted for credit in the future, but unfortunately it’s not always quite as straightforward as that.
Although they shouldn’t directly affect your credit history, having several unused credit cards could affect your chances of being accepted for further credit in the future. This is because lenders may view you as a potential fraud risk.
You could also run into difficulties when applying for a loan or a mortgage, as having access to a lot of credit may influence a lender’s decision. In particular, when applying for a mortgage you have to pass strict affordability checks, and having access to numerous lines of credit – regardless of whether you use them or not – could work against your application.
How do they affect my credit rating?
It’s difficult to say exactly how unused credit cards can affect your credit history, as different lenders will judge your application by their own set of rules. Where some lenders will reject your application for having a lot of unused credit at your fingertips, others may be more lenient.
When you’re looking to make a mortgage application, the thorough affordability checks that take place could mean that you’re rejected if you have many unused credit cards open. That’s why it’s probably best to cancel these cards if you’re looking to get a mortgage.
Another factor that could be taken into consideration by some creditors is how much available credit you have and what percentage of that you are actually making use of. For example, if you’re using 100% of the credit you have available to you, a lender is much more likely to turn your application away. Conversely, if you’re only using 25% or less of your available credit, a lender may look upon your application favourably. Again this all depends on the way in which each lender assesses your application.
As lenders have different rules, it may seem tough to try and figure out whether or not you should cancel some of your unused credit cards, so it’s best to find some sort of middle-ground. For example, if you do have access to a lot of unused credit cards, try cancelling the majority of them and keeping the ones you do use and perhaps one you don’t.
The important thing to remember is that reaching the limit on any of your credit cards is likely to make any lender view your application for credit negatively. If you find yourself close to the limit of one credit card, try spreading your usual spending across two or three credit cards instead.
How to cancel a credit card
Should you decide to cancel a credit card, you’ll have to get in touch with your provider and let them know. Simply cutting your credit card up won’t do anything, as you will still have an account open with the lender!
Head to your credit card provider’s website and look for the customer service number – you may find this on the back of some credit cards.
Once you have requested to close your account, it should take effect within a couple of days. From here, it’s wise to double-check your final statement to make sure everything’s gone as planned. Then you’re free to cut up your credit card and dispose of it accordingly!