Canceling your credit cards can lower your credit score. Factors that change your score are the length of your credit history and credit age. Your credit history is the length of time an account has been open and active. So, the first credit card you received at 18 years old would give you a credit history of 10 years.
Your credit age is the average time length of all of your accounts. If you have four accounts that are 14, 10, 5, and 2 years old, your credit age is 7.75 years.
If you close your oldest account, your credit age will drop significantly. Using the above example, canceling the 14-year-old account would lower your credit age to 5.6 years. Most lenders and creditors prefer when you have a credit age of 6 years or longer.
The number of credit cards is different from the number of credit accounts you have. Credit accounts include:
- Credit cards.
- Personal loans.
- Student loans.
- Car loans.
- Home loans.
You want to have a mix of different credit accounts, although there is no perfect combination. You will accumulate these different types through the course of your life.
Lenders like to see a variety of account types to show your responsibility with them. For example, 10 credit cards with a limit of $200 each are much easier to manage than a student loan for $20,000 or a mortgage for $200,000.
While your credit age can drop when you cancel a credit card, your number of credit accounts will only increase. If you have five open accounts and five closed accounts, you have had 10 credit accounts. Creditors and lenders like to see 11 or more accounts properly managed.
There are plenty of credit card usage tips that can help you pay off your debt.