Why Cutting up your Credit Cards may not be the Right Move
Many consumers, worried about an overabundance of credit card debt and rising interest rates, have chosen to take matters into their own hands and cut up their credit cards, once and for all.
But is this really the best decision, both for yourself and your credit score?
The first thing you need to know is that your ability to borrow virtually any kind of money is dependent upon a strong credit score, especially in today’s economy. It is because of this that cutting up your credit cards, although a seemingly smart idea, may really be detrimental to your credit score.
For example, cutting up your credit cards and canceling your accounts immediately affects your FICO score, as your available credit is now much lower. Because part of your FICO score is related to your available credit, canceling your accounts may do much more harm than good.
Consider All of your Options
Instead of cutting up your credit cards and closing your accounts, consider paying down the balances. This is simply the easiest way to protect your credit score and keep your debt manageable.
Your timely payments will allow you to establish a good credit history which will, in turn, improve your credit score. In addition, your low credit card balances will keep your available credit open, which will therefore produce a stronger credit score.
The Basics of a Good Credit Score
A good rule of thumb is to seek consumer credit counseling services if you are drowning in debt; otherwise, it is best to manage your debt by making timely payments and by keeping your credit card balances to a minimum.
It is also a good idea to regularly check your credit score. Order a copy of your credit report from all three credit reporting agencies at least on a yearly basis to make sure that your report is accurate and free of any errors or discrepancies.
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