Many people who have fallen into credit card debt or have a debt consolidation loan believe that saving money will help them improve their credit score and get out of debt. However, according to at least one expert, closing cards and putting the money aside for a rainy day could actually do the opposite.
In a piece for the New York Post, Catherine Curan writes that a number of experts indicate that a consumer who has a decent credit score with few credit cards is likely to see a 30 to 40 point drop in their credit score if they close out an account they maintain a zero balance on.
Evan Hendricks, author of Credit Scores & Credit Reports, says that although consumers might think closing a card is their best option, they may want to continue making purchases on it – for the good of their credit score.
"If you close a card, you don’t have the credit limit in your calculation, so use the card a little bit and pay it off," he told the paper.
While some may think they don’t need to worry about credit scores, syndicated columnist Liz Pulliam Weston writes that even those with no plans of owning their own home should factor in credit scores as landlords and insurance companies are known to factor in the scores when deciding on tenants or giving prices on insurance coverage.