A good credit score is crucial during the mortgage process, as it usually helps you to get better interest rates and terms, as well as lower fees on your home mortgage loan. Another reason a solid credit score is important is because it’s a direct reflection of your ability to pay, and it informs the lender if there is any possible risk when lending to you.

Curious how your credit score is determined? The credit bureaus determine your credit score based on five different factors. These factors include…

1. Payment History – Are you making your payments on time, or do you have late/missed payments?
2. Length of Credit – How long have you had your accounts and how often are you using them?
3. Amount Owed – How many total accounts do you have, and how much do you owe on each one?
4. New Credit – Have you opened any new accounts recently?
5. Types of Credit – Do you have any debt? This could include credit cards, student loans, auto loans, and more.

So, are there any consequences to closing a credit card? The answer is YES.

If you close a credit card account, you lose the payment history from it that shows lenders your ability to pay. If you make your payments on time, and that history is a positive thing, you’ve now taken that away from lenders to look at, which can impact your overall credit score.

So, how do you keep that account history? Try to avoid closing a credit card, and instead, just stop using it. That way, you can keep the credit history intact, plus you still have the card available to you should you need it for any emergencies.

If you truly feel like you need to close an account, try your best NOT to close your oldest line of credit. Your oldest account showcases your best length and credit history, and you want to use that to your advantage.

Remember, a good credit score can have real benefits to you in the mortgage process. It’s important to use credit wisely and responsibly, because in the end, the better your credit score, the more you can possibly save in the long run.