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The Front Porch Blog

Education on all things homeownership

How Closing a Credit Account Impacts Your Score

May 15, 2017 Homebuying

When it comes to your credit score, some rules are obvious – others are not.

For example, it makes sense that someone wanting to improve their credit should not apply to several accounts at once – or even at all. It may even be tempting to close some! However, closing a credit account, even one with a zero balance, can often have a negative impact on your score.

How They Impact Your Credit Score

Lenders want to know that you are a responsible borrower. One of the ways they check that is by looking at the length of your credit history. This will account for 15% of your score. By closing a long-standing account, you will shorten your history, making you appear to be riskier.

Another factor that affects your score is called credit utilization, which means how much available credit you have in relation to how much debt and the lower this number is, the better.

For example, if you have 4 credit cards each with a $2,500 limit for a total of $10,000 in available credit and you owe a total of $1,500 on two of them, your credit utilization is 15%. If you close two of those accounts that have zero balance, your credit utilization jumps to 30% because you're eliminating $5,000 of available credit that you were not utilizing.

Home Buyer Solutions Group Can Help

The formulas and factors that comprise your credit score can be confusing to consumers. However, our Credit Specialists have years of experience helping people with their credit and household finance. They are happy to answer questions and discuss ways you can build and maintain your credit score.

The Home Buyer Solutions Group team is comprised of experienced Mortgage Credit Specialists who can help empower you to manage your finances and credit.

Speak to a Credit Specialist today!