Cancelling Credit Cards

A person’s credit score is very important for all future financial transactions. While it is important, it also can be easily damaged by actions that are taken on a daily basis. Once a credit score is damaged, it takes a lot of hard work to get it back to its previous state.

The top mistake that people make is closing a credit card account. While it would seem that this couldn’t possibly hurt a person, it can. Closing an account hurts a person’s credit report because it removes the good payment history that the person had. If the card is never used, it doesn’t hurt anything to have it show up because there are no late payments associated with the card.

Credit card payments, like all payments, stay on a person’s credit report for seven years. When the card is cancelled, it no longer makes reports on the person. It is like erasing a person’s excellent academic record and then being surprised when there are fewer amazing job offers. No one wants good things about their history erased and that is exactly what happens with cancelled credit cards.

Another problem with closing a credit card is that it increases the amount of available credit that a person is using. If a person has two credit cards with $10,000 limits and has a balance of $1000, that person is using 5% of his or her available credit. If one of the cards is cancelled, that number becomes $1000 out of $10,000 or 10% of the available credit. While it’s not a huge difference, it does make a big difference on credit reports. So while paying off a credit card is a good thing, cancelling the account is not necessarily beneficial.

Contact a Boston Bankruptcy Lawyer

If you have exorbitant credit card and other debts and have no idea how you could possibly ever pay them off, contact a Boston bankruptcy lawyer from Joshua Spirn & Associates at 1-800-975-5346 to discuss your financial situation and to determine which form of bankruptcy works best for you.