Why it's important to keep your credit card open

John Doe

Engineer

January 2, 2023

6

min read

Overall, it’s important to keep your credit card open when building credit.

Basics

When it comes to building credit, one of the most important things you can do is keep your credit card open. This may seem counterintuitive, as many people think that closing a credit card is the best way to improve their credit score.

However, closing a credit card can actually have a negative impact on your credit score.The reason why it’s important to keep your credit card open is because it helps to maintain a good credit utilization ratio. This ratio is the amount of credit you’re using compared to the amount of credit you have available. A good credit utilization ratio is typically around 30%, meaning that you’re using less than 30% of your available credit.

When you close a credit card, you’re reducing the amount of available credit you have, which can cause your credit utilization ratio to increase. This can have a negative impact on your credit score, as it can make it look like you’re relying too heavily on credit.

Another reason why it’s important to keep your credit card open is because it helps to increase the length of your credit history. The longer your credit history, the better your credit score will be. Closing a credit card can reduce the length of your credit history, which can have a negative impact on your credit score.

Finally, keeping your credit card open can help you to take advantage of rewards and other benefits that come with having a credit card. Many credit cards offer rewards such as cash back, points, and discounts on purchases. These rewards can be a great way to save money and make the most of your credit card.

Overall, it’s important to keep your credit card open when building credit. Doing so can help you maintain a good credit utilization ratio, increase the length of your credit history, and take advantage of rewards and other benefits.