If you are thinking about cancelling a credit card, you are likely making a big mistake. When you cancel a credit card, you immediately hurt your credit score in a big way. In this video, I'll break down what you should do instead to build your credit score.
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If you have a credit card that you no longer use, you might have thought about cancelling it. I'm here to tell you that this would be a very bad idea. Building your credit score is a process that takes a long time and one misstep can have a huge impact.
Cancelling a credit card is a massive mistake because it negatively impacts all 5 of the criteria that make up your credit score. For a full breakdown of those, check out this video: https://youtu.be/yB-iv6zSsMM
Fortunately, there's a much better solution than cancelling your credit card that is easy to do and will end up boosting your credit score in a big way.
Now if you have a credit card with no annual fee that you are thinking about cancelling, just don't. There is no reason to cancel a credit card that is not costing you anything because keeping it open and just sticking it in your freezer will keep your credit score increasing without needing to do anything.
However, if your credit card has an annual fee, then there is some action you need to take. There's no reason to pay an annual fee on a credit card that doesn't benefit you anymore, so cancelling the thing could seem like an appealing option. But, you don't want to do this because it's going to hurt your credit score.
The better solution is to downgrade your credit card instead. Most people don't realize that many credit cards from big banks exist on a ladder. At the bottom of the ladder are no-fee credit cards that don't earn much for rewards. Then as you move up the ladder, you see cards that will earn you more rewards, and charge higher fees.
Most banks allow people to move along the ladder and either upgrade to better card or downgrade to worse cards by simply calling them up. In this case, you'll want to downgrade your cards instead of cancelling them.
But, before you rush into downgrading a card, there are a number of important rules you'll need to follow including a specific timeline for exactly when you should downgrade it. In most cases, if you try to downgrade a card too early, you'll end up getting flagged by the bank for suspicious activity and may even end up getting your account shut down.
So stay tuned as we break down exactly how to downgrade a credit card the right way. Enjoy!
00:00 - Intro
00:34 - The Problem With Cancelling Credit Cards
01:00 - Effect On Credit Score
01:42 - Payment History
02:36 - Credit Utilization
03:32 - Age Of Accounts
04:30 - The Better Solution
06:41 - Step-By-Step Timeline
09:27 - How To Do It?
11:38 - Outro