Many factors can affect your total credit score. Having too much credit can actually drive your score down a bit, and using too much credit is a negative, as well. But, what should you do when you get a good credit offer with terms that beat your existing accounts? If you handle the switch carefully, you can add a new credit card without affecting your total score.
Before you add a new card, take a look at your total available credit and compare it to your outstanding balances. You want to maintain around a 30 percent utilization rate, so adding a card may even improve your credit if you don’t increase your spending to match your new card. If you generally maintain low balances, canceling a single card and opening a new account shouldn’t have much of an effect on your score.
The age of your credit history is one of the biggest factors that can determine your score. The average age of open accounts can change dramatically if you close some of your oldest credit cards. Instead of closing these accounts, consider calling the companies and asking for better terms. If you have been a good customer with a long history of timely payments, you may be able to negotiate better rates and fees.
Unless you have cards with annual fees or are trying to control a spending problem, you may not want to close any accounts at all. Simply putting a card away and keeping it at a zero balance can be a great way to help your credit score. This will keep your credit available high without driving up your debt.
If you have healthy credit, the impact of closing a credit card account shouldn’t last long. You may take a small hit in the short-term, but your score should bounce back relatively quickly. Unless you are trying to get a mortgage or other large loan, don’t let fear of a negative reaction to your score stop you from getting rid of a large annual fee.
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