A reader asks: I have a credit score of around 800. I want to get rid of about 10 of my 14 credit cards. The average age of my cards is around eight years. Moneyist, can I do it over time without hurting my credit score?
April is National Financial Literacy Month. To mark the occasion, MarketWatch will publish a series of “Financial Fitness” articles to help readers improve their fiscal health, and offer advice on how to save, invest and spend their money wisely. Read more here.I’m a 67-year-old widower with a credit score of around 800. I’ retired and live off of Social Security of $1,440 a month. I live rent-free, and my car is paid off. I pay my credit cards off each month.
Closing your credit cards will hurt your credit-utilization ratio — that is the ratio between your credit-card balance and your credit limit. It is important to keep that ratio low, so make sure that you carry a zero balance on any card that you cancel. Generally, however, most experts recommend keeping your credit-utilization ratio below 30%.
Before closing accounts, redeem your credit-card points and miles, and make sure that there is a zero balance on these cards before canceling them. Keep any cards that don’t have an annual fee so you don’t hurt the duration of your credit history. A card with a high credit limit is also worth holding on to.
You don’t seem to have a diverse credit mix — given that you don’t pay rent or a mortgage and your car is paid off — but that’s a relatively small part of your overall credit score. It usually takes three to six months for your credit score to recover. You could cancel approximately three cards per month for six months. I suggest canceling the cards that are costing you the most in fees.
You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on Twitter.
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