Closing a credit card could hurt your credit score – ‘misconceptions’ you need to know | Personal finance | Finance


Credit card use is something that many Britons use as it is an important way to establish a credit rating. According to, around a quarter of Britons use credit cards as a way to spread the cost of big purchases and around one in ten use them as a way to earn cash and rewards. Another in ten use credit cards as a way to access money they don’t have at the time, and seven percent of respondents use them to manage their debts.

During the current cost of living crisis, the topic of credit ratings, finances and debt has come up often and Jonathan Such, sales manager at First Response Finance, says the topic is often accompanied by “a lot of myths , misconceptions and confusion”.

Mr Such said: “We understand that for many people credit scores can be a stressful aspect of their personal finances.

“There are many myths surrounding credit scores, and many people struggle to understand the different credit options available and we believe that having previous credit issues shouldn’t always prevent you from getting the financial help you want or need.”

The first misconception highlighted was that a person’s credit rating is influenced by their income.

Mr Such said: “This is completely wrong, the amount of money you have is not taken into account by credit reporting models, and your credit reports do not show your income, so your score cannot be impacted!”

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Mr Such explained that credit scores are ‘solely’ based on information in a person’s personal credit report, meaning a change in income will not affect them in any way.

He added: “A change in your income, however, can affect your ability to pay your bills, which could affect your credit score if someone is unable to pay their bills and, in this case, the bills unpaid bills would impact your credit score.”

The second misconception that Brits often believe is that to fix a bad credit, people must first clear their debts. What Mr. Tel says once again is wrong

He added: “Missing or late payments can be one of the worst things you can do to your credit score, and while paying off debt is a good decision, making repayments on existing debt is often the best way to improve bad credit.”

Mr Such also pointed out that people often think their credit score is something they don’t need to worry about when they’re young and need to be taken care of when they’re older. .


“Service providers and lenders will also consider other factors, such as account history and affordability. With a low credit score, you may simply be offered a more limited amount of credit or higher interest rates rather than being rejected altogether.

Another misconception Mr. Such pointed out was that a credit score can be helped by closing a credit card, the result is actually the opposite.

Mr Such said: “Your total available credit is reduced when you close an unused account, causing your credit usage to increase. Your credit usage is a ratio that describes the percentage of the credit you have that you actually use. »

According to ClearScore, when someone uses too much of their total available credit or too much on a card or loan, it could hurt their score and a “good strategy” is to keep it below 30%, or “even better.” below 20%.

When applying for credit, Such recommends that people “think” about what’s important to them, but be realistic about their expectations.

He explained: “As a client, you have the choice of how much you want to borrow, over how long and get payments tailored to a budget that works for you.

“The caveat to this is that businesses should always seek to lend responsibly and therefore may place limits on the amount of money they are willing to lend based on affordability checks.

“It’s always helpful if you as a customer have expectations, but they’re based on the reality of knowing that you may not have perfect credit, most companies should have a facility on their site web where you can check payments under different terms and rates.”

Mr Such also recommends that people do their research in order to “fully understand” the product they are applying for, as not all financial products are “created equally” and often the terminology used around these products can be “puzzling”.

He also reminded people that even with a low credit score, people should be treated like valued customers and that having a credit report “that is not rated as perfect” does not mean that someone has to compromise on the service he gets.

Mr Such added: “Trying to understand your credit score can be confusing, but with the help of financial experts you can gain a better understanding and stand a chance of being accepted for funding.

“It’s important to remember that credit is a tool, and what matters is how you use it! »


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