Be Wary of Closing Credit Cards When Applying for a Mortgage
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Dear Credit Care,

I am holding a store credit card for a store that no longer has physical stores and purchases may be made only online. I want to close that credit card. Would that affect my credit score, as I start looking for a mortgage loan? Also, I hold another store credit card and am not using it much. Will that hurt my credit score if I am going to close that one, too?

– Rajesh

Dear Rajesh,

You are wise to consider how any changes to your credit profile might affect your credit score, particularly when shopping for a mortgage loan. Without knowing the particulars of your credit profile, it is difficult to know precisely how closing the accounts would affect your credit. I can paint the broad outlines, though, and let you know that closing the accounts probably means a slight, temporary drop in your credit score.

Let’s look at the big picture first. Closing accounts could significantly lower your available credit. That would hurt your credit utilization rate — how much debt you have compared to available credit — and that’s the second-most important factor that the credit scoring firm FICO uses in calculating your score. (Your

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Related News:

College Students: Should You Open an In-Store Credit Card?
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Growing up is tough enough without the worries of your financial future, so Money101  is here for you. E-mail us your questions and let us take off some of the pressure.

We’ve all been there: While checking out at your favorite retailer, the salesperson asks if you would like to sign up for their in-store credit card and save 10% to 20% on today’s purchase. As you glance down on your heaping merchandise pile, you do a rough estimate of how much you can save and the card is tempting, especially for college students and post-grads trying struggling to make ends meet.

“Oftentimes, that is a great venue for these 18 or 19 year-olds to be able to start establishing credit, but they have to be very careful about it, just like all of us do,” says Kimberly Foss, personal finance expert and founder of Empyrion Wealth Management.

Despite regulations like the CARD Act that are intended to make younger consumers more cognizant about the importance of a healthy credit history, credit card debt remains…………… continues on Fox Business

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