This is a common problem as we at times tend to feel the pressure of maintaining a credit card account. The truth is closing a credit card account and transferring all the balance will only increase the balance/limit (aka b/l) ratio which means yes, it will hamper your credit score. Maintaining a low b/l ratio is the key specially when you are about to shop for new credit.
I agree to Carol. Closing an existing credit card account with existing debts hurt your score. Once you opt to close an existing account the balance get automatically transferred to existing card accounts and increases the balance limit ratio. This eventually decreases ‘New credit’ which plays an important role (accounts to 10%) in determining your FICO credit score.
Let’s take an example:
Let us assume you have an existing balance of $500 on five credit cards with a limit of $1000. So your total credit limit is $5000. Again your total balance ($500) accounts to 10%. Say you now plan to close your existing two accounts and transfer the balances to the other three. Now your total credit limit is limited to $3000 and your total balance is $500 which now accounts to 16.7% (approx). Clearly an increase in the balance to limit ratio of 6.7% (approx).
Hi Lisa,
Welcome to the forum.
This is a common problem as we at times tend to feel the pressure of maintaining a credit card account. The truth is closing a credit card account and transferring all the balance will only increase the balance/limit (aka b/l) ratio which means yes, it will hamper your credit score. Maintaining a low b/l ratio is the key specially when you are about to shop for new credit.
If you have any other queries let us know.
~Carol
Hi Lisa,
Welcome onboard.
I agree to Carol. Closing an existing credit card account with existing debts hurt your score. Once you opt to close an existing account the balance get automatically transferred to existing card accounts and increases the balance limit ratio. This eventually decreases ‘New credit’ which plays an important role (accounts to 10%) in determining your FICO credit score.
Let’s take an example:
Let us assume you have an existing balance of $500 on five credit cards with a limit of $1000. So your total credit limit is $5000. Again your total balance ($500) accounts to 10%. Say you now plan to close your existing two accounts and transfer the balances to the other three. Now your total credit limit is limited to $3000 and your total balance is $500 which now accounts to 16.7% (approx). Clearly an increase in the balance to limit ratio of 6.7% (approx).
Regards,
Richard
transferring balances
does tranferring balances from a credit card automatically close out the card you are transferring?
No, not always. Inactivity may cause some to close, too. It depends on the creditor.