Credit cards have become an integral part of our financial lives, offering convenience, rewards, and the opportunity to build a strong credit history.
If you have an older credit card that you no longer use frequently, you may wonder whether it’s necessary to keep it active.
In this blog post, we’ll discuss the compelling reasons why it’s beneficial to maintain your oldest credit card and how it can positively impact your creditworthiness.
Length of credit history
One of the key factors considered by credit scoring models, such as FICO or VantageScore, is the length of your credit history.
The longer your credit history, the more reliable and stable you appear to potential lenders.
By keeping your oldest credit card active, you preserve that valuable history, showcasing your responsible credit management over time.
Credit utilization ratio
Your credit utilization ratio measures the amount of credit you use compared to your total available credit.
It’s advisable to keep this ratio below 30% to maintain a healthy credit score. By keeping your oldest credit card active, you retain its credit limit, which contributes to your overall available credit.
This helps keep your credit utilization ratio low, positively impacting your creditworthiness.
Positive payment history
Consistently making timely payments is crucial for maintaining a good credit score.
Your oldest credit card likely has a long history of on-time payments, demonstrating your responsible borrowing habits.
This positive payment history reinforces your creditworthiness and can lead to better terms and rates when seeking future credit.
Impact on average age of accounts
The average age of your credit accounts is another significant factor in credit scoring.
Closing your oldest credit card can decrease the average age of your accounts, potentially lowering your credit score.
By keeping the card active, you retain its contribution to the average age, preserving the positive impact it has on your creditworthiness.
Credit scoring models also consider the variety of credit accounts you have, including credit cards, loans, and mortgages.
Having a diverse mix of credit can demonstrate your ability to manage different types of financial responsibilities.
By keeping your oldest credit card active, you maintain a credit card account in your portfolio, adding to the diversity of your credit mix.
Access to emergency credit
Life is unpredictable, and unexpected expenses can arise. By keeping your oldest credit card active, you have a backup line of credit available for emergencies.
It’s wise to have a card with a sufficient credit limit that you can rely on when needed, providing peace of mind and financial security during challenging times.
Retaining rewards and benefits
Older credit cards may offer unique rewards programs, perks, or benefits that newer cards don’t provide.
By keeping the card active, you can continue to enjoy these exclusive features, such as cashback, travel rewards, or access to airport lounges.
These perks can add value to your financial journey and maximize the benefits of your credit card usage.