Ask the Nerds

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How it works

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Think of it like free financial advice for your specific questions and circumstances.

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EXAMPLE QUESTION AND ANSWER

Question

Hi Nerds, What will happen to my credit score if I close a credit card I rarely use? It’s one of two credit cards I have, both with a $10,000 limit. I only use this card once a month to pay a utility bill that’s about $100. My other card has a balance of $3,400. I’m considering closing the card I rarely use because its perks aren’t as good as my other one, which I opened a few months ago, and I no longer want to pay the annual fee. My other forms of credit include a car loan and student loans. I don’t have plans to apply for new credit anytime soon.

Thanks! - Credit Concerned

Answer

"Canceling your credit card is likely to cause a dip in your score, mainly because of the effect on your (the amount of your credit limits that you’re using). Utilization is one of the biggest influences on scores. Right now, you have a $20,000 limit between the two cards. It sounds like you keep the one paid off, since it’s a small bill each month, but on the other one you’re carrying a $3,400 balance month to month. That’s roughly a 17.5% credit utilization ratio. (You could yourself, or just go to the credit score section of your NerdWallet dashboard to see it calculated for you.) It’s best for your credit score to keep your utilization below 30%, and you’re well under that now with the two cards — but closing one card will drop your overall limit to $10,000. Then, your $3,400 balance jumps up to a 34% utilization. You’re very likely to see your score drop until you can lower that balance, which lowers your utilization. Other factors to consider: Having a mix of credit cards and loans can help your score, so it’s good that you’ll still have the other credit card to maintain that diversity. On the other hand, closing one card may lower the average age of your accounts, which some credit scoring companies factor into their scores. The good news is that as long as you pay off the card before closing it and keep practicing healthy credit behavior — including bringing down that other card’s balance — your score should rebound over time. But a better option for your score could be asking your issuer to , if it offers one. Changing your card rather than canceling it will not impact your score, as long as the credit limit doesn’t drop.

Meet the Nerds answering your questions

Lauren Schwahn

Lead Writer | Personal finance, debt

Lauren Schwahn is a writer at NerdWallet who covers credit scoring, debt, budgeting and money-saving strategies. She has contributed to the "Millennial Money" column for The Associated Press. Her work has also been featured by USA Today, MSN, The Washington Post and more. Lauren has a bachelor’s degree in history from the University of California, Santa Cruz. Read articles by Lauren

Tommy Tindall

Lead Writer | Personal finance, debt

Tommy Tindall, a writer at NerdWallet since 2021, covers a range of personal finance topics, including side gigs, saving strategies and smart shopping. His work has appeared in The Washington Post and MarketWatch. Tommy previously worked in marketing at Fannie Mae. Read articles by Tommy

Frequently asked questions

Yes, Ask the Nerds is free for a limited time as a beta service (meaning we’re still working in it!) — the earlier you submit your question, the higher the likelihood it will be chosen.

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A NerdWallet editorial writer will respond based on the knowledge they’ve gained from researching and writing about financial topics, using the information you provide. However, keep in mind that there might be other important factors related to your situation that we are not aware of. The responses are based on general principles and are for educational purposes only; they are not financial advice. For more personalized guidance, it's best to consult a Certified Financial Planner or a financial advisor.