Mastercard cardholders who are considering closing their accounts are provided information on how it can impact their credit score. They are provided three ways closing the account can make credit scores go down. Readers are also advised of why it is sometimes still a good idea to close the account.
A Mastercard credit card can make purchasing easy and can help when you have an emergency. However, if you are trying to break away from credit card usage, you may be asking how closing your account will impact your credit score. How does closing your Mastercard card affect your credit score? You can get more information by contacting Mastercard customer support here, and you can read below on the impact closing your card can have.
When utilizing credit, the optimal amount to use at any given time is 30% or less of your total available credit. When you close your Mastercard credit card, it will change your overall credit utilization ratio. For example, if you have a $500 Mastercard that is at a zero balance, and you have another card with a limit of $1000 with a $450 balance, your overall potential available credit is $1500. Of that $1500, you are currently only using 30% of your available credit. If you decide to close your Mastercard, you will then have $1000 total credit with $450 utilized. This puts your credit utilization ratio to 45% and can cause your credit score to go up.
The longer you have had credit, the more favorable it looks on your credit score. If your Mastercard is one of your oldest accounts, closing it will change the average age of your credit history. This could cause your score to be negatively impacted because it will appear you are new to credit.
If the only credit card you have is a Mastercard, but you have personal loans or installment loans such as a vehicle loan, closing your Mastercard card takes away from your credit diversity. Potential creditors like to see a balance of different types of credit on your history because it shows you are able to effectively handle several different types of accounts. Credit cards
While closing your Mastercard card can negatively impact your credit score, the points lost are usually regained within a few months. There are some good reasons for closing the account. Those reasons include higher than average interest rates, high annual fees and irresponsible usage of the card.
If you are a Mastercard holder and you are considering closing your card, remember that it can affect your overall credit score. For more information, contact Mastercard customer support here.
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