Don’t close out credit cards
Closing your credit cards randomly is also not a good idea. “You don’t want to do that because one of the factors that is used to calculate your credit score is your average length of history, and if you close your credit card, that affects that ratio,” says Shawn Tydlaska, CFP and founder of Ballast Point Financial Planning based in Burlingame, California.
“Another big thing that impacts your credit score is your credit utilization ratio,” Tydlaska says. “That’s how much credit you’re using compared to how much is available. So, if you close a line of credit, then it looks like you’re using more of your available credit, which also dings your credit score.”
If you want to close a credit card to cut expenses, don’t do it before reviewing other options. For instance, you could make a balance transfer to a card with a lower rate. Just make sure you don’t transfer a high balance on the new card because it could increase your credit utilization and your credit score could go down. Here are the other 10 Money Mistakes You’re Making, According to Financial Experts.
