Date:4 March 2007 I Comments: 0 I Views:2,628

I recently read an interesting article on a US finance blog regarding how canceling credit cards may affect your credit rating.

To summarize, the article explained that if you are to cancel a credit card you should cancel the ones with the lowest credit limit.

The reason for this is what you are left with is cards with high credit limits that still have a reasonable amount of available credit instead of low credit limit cards that are maxed out.

Something called ‘credit-utilization ratio’ suggests that if you have lots of credit at your disposal, you’re only using a relatively small amount of it and you’re managing it successfully, you will be regarded as a fairly safe risk when it comes credit.

This logic may also be applied to imply having multiple cards with small balances on them may help to build or strengthen an individual’s credit history.

I’ll be looking into this in the hope to find evidence to suggest it may apply in the UK and if you have any information feel free to comment.

One thing to consider on this matter though is if you have multiple cards; don’t be tempted to start using up the available credit.
 

Category: Credit Cards