How much does closing a credit card account accutually hurt your credit?

My husband has a Sears card that has a horrible APR. The balance was recently paid off, but with this rate, we will always owe something on it. (Like a couple bucks.) We'd rather close the account than keep paying a couples buck every month on a card he will never use again.


People have told me closing accounts hurts your credit. But how bad? And I'd really rather close it than deal with the hassle of it.


Just trying to make an informed decision. Thanks.
How much does closing a credit card account accutually hurt your credit?
This is what makes up your score:





1. Payment history- 35%


2. Total debt owed to available credit ratio-30%


3. Length of time establishing credit-15%


4. Types of credit established-10%


5. Inquiries and New accounts-10%





With that said, closing an account affects factors 1-4. It reduces the active payment history on your open accounts, decreases the available credit, giving the appearance that you're borrowing more than your capable of borrowing, it also shortens the average age of accounts, which if this card's been open a long time, it gives the appearance that you're inexperienced with credit.





My suggestion would be to:





A. Keep the card open after it's paid down and only make SMALL purchases($20/max) and pay it off on time every month. This way, the account is showing activity which builds credit WITHOUT getting charged boatloads of interest in the process.





or...








B. Open another CC with the same limit as the Sears Card or increase the limit on another one of his credit cards to match the credit limit that he will lose if he did close the account. Even though it would shorten the average age of accounts and payment history, at least he can maintain his utilization ratio(debt to avail credit).





Hope this helps





Good luck!
Reply:Just keep the card open and pay off the balance in full every month. Information on the Sears cc: http://www.creditcardassociate... Report Abuse

Reply:http://www.searscardnow.info Report Abuse

Reply:Unless your card has some type of annual fee, which I've never heard of with a Sears card, you can owe a couple bucks every month. Regardless of the APR, if your balance is $0, then there can be no interest.





If you do close your card, it won't make your credit score drop 100 points, but it does limit your available funds.
Reply:If you are only paying a couple bucks a month, I don't think it's an annual fee. You are paying on the balance on your card from the previous month. The only way to really stop it would be to send in a few extra dollars to ensure there is no balance.





Check to make certain you are not paying any other fees. If so then by all means cancel the card.





But as your research has shown, you will experience a small drop. I can't say for certain without looking at your whole picture. For example if you have several cards, canceling one will not effect it much. But if that is your only card you are wiping your your entire credit history, and taking your score with it.





If possible do not cancel the card. If you do, just sit tight for about 6 months and your score should restore itself. As long as you are not planning any major purchases within that time it won't matter.