The Affects to Your Credit Score

What Your Credit Score Looks Like With A Credit Card & Personal Line Of Credit Open:

Credit Card #1  Available Credit $10,000 with a balance of $5,000

Credit Card #2 Available Credit $10,000 with a balance of $5,000

Line of Credit: Available Credit $30,000 with a balance of 0

Total in available credit is $50,000 with balances of $10,000 (a/k/a utilization). Take 10,000 (the total that you owe) and divide that by your “available credit” of $50,000.  This calculation shows that you have used 20% of your available credit.  Which is a good ratio; You are in the range you want to be in for revolving debt. (Remember 30% or less is the magic number).

What Happens To Your Credit Score When You Close Your Personal Line Of Credit:

Credit Card #1  Available Credit $10,000 with a balance of $5,000

Credit Card #2 Available Credit $10,000 with a balance of $5,000

The total available credit is now $20,000 with balances of $10,000.  You are now at 50% of your capacity and your credit score just decreased because you closed your credit line and lowered your capacity.  

You have just lowered your credit score by 50 points in this example because you closed your line of credit. 

Rule of thumb: For every 1% capacity= 1 point on your FICO score.