Closing a credit card before applying for another can have positive and negative implications. Here are some factors to consider when deciding whether to close a credit card before applying for a new one:
Positive Implications:
Simplified Finances: Closing a credit card can reduce the number of accounts you have to manage, making your finances more streamlined. If you find it challenging to keep track of multiple cards, closing one may help you better organize your credit accounts.
Negative Implications:
Credit History: Closing a credit card shortens the length of your credit history, which is an important factor in determining your credit score. If the card you plan to close is one of your oldest accounts, it may negatively impact the average age of your credit accounts and potentially lower your credit score.
Credit Mix: Credit scoring models consider the types of credit you have, such as credit cards, loans, and mortgages, in assessing your creditworthiness. Closing a credit card may reduce the diversity of your credit mix, which could negatively impact your credit score. However, the effect of this factor is generally less significant than others, such as payment history and credit utilization.
Account Closure Impact: Closing a credit card account may lead to losing any associated rewards, benefits, or perks. If you have accumulated rewards points or enjoy certain benefits with the card, consider whether these factors outweigh the potential negative impacts of keeping the card open.
The decision to close a credit card before applying for another depends on your circumstances and goals. If the card you plan to close has high fees, you no longer use it, or it doesn't provide significant benefits, closing it may be a reasonable choice. However, if the card has a long credit history, a positive payment record, or contributes to your credit mix, it may be beneficial to keep it open.
Before closing a credit card, consider the potential impact on your credit score, credit history, and overall credit profile. If you decide to close the card, ensure you continue using your remaining credit cards responsibly to maintain a healthy credit profile.