Canceling your credit card may hurt you

UNDATED (WPRI) - If you're thinking about canceling a credit card, be careful - because it can really put a dent in a your credit score.

Experts say this is due to credit utilization, which is the amount of credit used, compared to the amount available.

The utilization ratio makes up about 30 percent of a credit score.

Officials say that if you are considering closing an account, do not do it if it's your only credit card and if you have others make sure you have a grasp on the balances.

If you still are interested in canceling a card, the balances should be as low as possible - so that you have a low utilization ratio, even if you close that credit card and lose the available credit.

People close credit card accounts for a number of reasons mainly related to new or increased fees and interest rates or if they are switching to a new card.

Some tips for closing credits include:

• Keep the old credit card open until you receive the new one that way your credit score will start utilizing the new available credit with the new credit card, so you will minimize the impact a little.
• Try to have a zero balance when closing the card so you can close it over the phone - but also follow up later in writing.
• After a month or so, check your credit report to make sure the account is noted as “closed.”

Closing a credit card while looking for a loan or mortgage may be worth it, but cancelling a credit card shouldn’t be a source of stress if you have good credit since the impact on your credit scores are likely to be minimal and temporary.