Don’t do this with your credit cards – Dr Boyce Watkins

The credit utilization ratio is the amount of credit you’ve used compared to the amount of credit you have available. It’s an important factor in determining your credit score, as it indicates how responsible you are with credit.

If you have a high credit utilization ratio, it can negatively impact your credit score. This is because it suggests that you may be relying too heavily on credit and may be at risk of not being able to pay off your debts. On the other hand, a low credit utilization ratio indicates that you are using credit responsibly and can handle your debts effectively.

Canceling credit card accounts can also impact your credit utilization ratio. This is because it reduces the amount of credit you have available, which can increase your utilization ratio. For example, if you have $10,000 in credit available and you cancel a credit card with a $5,000 limit, your available credit will be reduced to $5,000. If you have a balance of $2,500 on your remaining credit cards, your utilization ratio will increase from 25% to 50%.

Therefore, it’s generally not a good idea to cancel credit card accounts solely because of the impact on your credit utilization ratio. Instead, consider keeping the account open and using it occasionally to keep it active. This will help maintain your available credit and keep your utilization ratio low, which can positively impact your credit score in the long run.

Sincerely,
Dr Boyce Watkins
BoyceWatkins.com

#boycewatkins #buyblack #learnontiktok #powernomics #wealth #blacktiktok #blackowned #investing #creditcard #debt

source