Closing a Credit Card Maththematical Formula

[ew0506]

Hello Folks,

Question. Is there a formula to perform in order to somewhat determine based on debt to income ratio if closing a credit card would be worth it? Meaning, would it probably potentially impact or not impact my score?

Thanks in advance!

[Remedios]

The only immediate effect of closing a card is
potential change in utilization, which can lead to scoring changes.
Cards can stay on CR for up to 10 years, so age is not affected for a while
If your aggregate utilization does not cross a threshold, there should be minimal or no change (assuming card you're closing has $0.00 balance)

[SouthJamaica]

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@ew0506 wrote:

Hello Folks,

Question. Is there a formula to perform in order to somewhat determine based on debt to income ratio if closing a credit card would be worth it? Meaning, would it probably potentially impact or not impact my score?

Thanks in advance!

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As to the debt to income ratio, it's just arithmetic; you could look at your past credit reports, see what monthly payment they've been attributing to that account, and what the reported balances have been, then subtract those from your totals. And then divide the new total balances by the new total payments and you'll know exactly.

As to your FICO scores, as @Remedios pointed out, the only short term impact would be from a change in utilization. When the closed account drops off your reports, which could be a year from closing or could be 10+ years from closing, or anywhere in between, there could be some effect on average age of accounts (and if it's your oldest account, on age of oldest account).

[pinkandgrey]

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@Remedios wrote:
The only immediate effect of closing a card is
potential change in utilization, which can lead to scoring changes.
Cards can stay on CR for up to 10 years, so age is not affected for a while
If your aggregate utilization does not cross a threshold, there should be minimal or no change (assuming card you're closing has $0.00 balance)

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This exactly. Assuming your utilization doesn't skyrocket in proportion to your available credit, you will have no issue closing the card(s). 

Good luck!