Q. I have had a popular national credit card since 1988. They raised the annual fee to $150, so I’ve decided to change to a no annual fee credit card from the same issuer and cancel the original card. Will this adversely affect my credit rating, which is an excellent?
— Credit concerned
A. We understand not wanting to pay that annual fee. It’s pretty hefty.
But yes, but by cancelling one card and opening another it is possible that your credit score could be negatively affected.
One of the calculations for credit scores is the debt utilization rate, or how much money you owe compared to how much you can borrow, said Kenneth Van Leeuwen, a certified financial planner with Van Leeuwen & Company in Princeton.
“By closing one card, you are essentially lowering your available credit limit and would probably increase your debt utilization,” he said. “If you opened a new card with the same credit limit, this would keep the amount of credit available to you the same, thus keeping your debt utilization rate the same.”
But closing the older card will also change your length of credit history, a smaller but important part of your score.
Chances are the lower score will be more of a ding that doesn’t last very long.
“You may see some decrease in score while the credit rating agencies process the closed card and the new card, but over time it should all wash out and your score should remain excellent,” Van Leeuwen said.
Email your questions to Ask@NJMoneyHelp.com.
Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.
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