If you are thinking about canceling your Chase credit card, you should first think about how doing so could negatively impact your credit score. Canceling a credit card can raise your credit utilization ration and lower the average age of your credit accounts. Both of these things can lower your credit score.
Everyone knows that paying your bills on time is an important part of maintaining a good credit score. However, there is more to your credit score than timely repayments. If you are thinking of closing out your Chase credit card account because the rewards aren't exactly what you are looking for, or to avoid the annual fee, you should stop to consider how doing so could lower your credit score.
Another important part of your credit score calculation is your credit utilization ratio. This ratio is simply the total amount of debt you carry on your credit cards divided by the total credit limit you have on your cards. So when you cancel a credit card, you have a lower total credit limit, so your credit utilization ratio goes up. This is not a good thing.
Credit reporting agencies pay attention to your credit utilization ratio because they believe it indicates how well you are managing your finances. A high credit utilization ratio indicates that you are using a large portion of your available credit. This in turn suggests that you are having a hard time paying off your credit card debt, and that suggests that you are having financial troubles and may not be able to handle much more debt.
Say for example that you have three credit cards with a $1,000 credit limit on each and carry a balance of $1,000 spread over the three of them. This gives you a credit utilization ritual of $1,000/$3,000, or 0.333. If you have only two cards to spread that debt over, your credit utilization limit is $1,000/$2,000, or 0.5 In other words, you will have moved from using only a third of your available credit to using half of it. That kind of change could significantly lower your credit score.
Credit reporting agencies also pay attention to the average age of your credit accounts. Having had a credit account for a long time suggests that you manage your money well. When you cancel a card you have had for a long time, your average credit account age can decrease, if your other credit card accounts are newer than your Chase account. However, this is not such a concern if your Chase account is relatively new.
If you have any questions for Chase about closing your Chase credit card account, you can contact a customer service representative by phone or help forum.
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