(NewsNation) — If you’ve been reminded to make a purchase using an old credit card, you might consider wanting to cancel the card altogether. But is that a good decision for your credit score?
Will canceling a card affect my credit score?
Canceling an unused credit card can unexpectedly lower your credit score. Closing an account reduces available credit and increases your credit utilization rate, which accounts for 30% of your FICO Score, according to Experian.
For example, closing a card with a $2,000 credit line could raise your utilization from 20% to 33%, potentially damaging your credit standing. Financial advisors recommend keeping credit utilization below 30%.
When should you keep an old, unused credit card?
Experts suggest maintaining unused credit cards in several scenarios:
- You’re planning to apply for a mortgage
- The card has no annual fee
- You can make small, occasional purchases to keep the account active
When should you cancel an old unused credit card?
Consider canceling a credit card if:
- It carries a high annual fee you can’t afford
- The account is relatively new
- You’re committed to dramatically reducing spending
While keeping credit card accounts open is generally recommended for maintaining good credit, individual financial circumstances vary.
NewsNation’s Ashley Soriano contributed to this report.