What is a common consequence of closing credit lines?

Closing credit lines can lower the average age of credit accounts, which is an important factor in credit scoring models. The average age of accounts is calculated by looking at the age of all open accounts. When a credit line is closed, especially if it is one of the older accounts, it can detract from the overall average age of your credit accounts. A lower average age can negatively impact the credit score, as it suggests less credit experience to lenders.

In contrast, closing credit lines can affect other aspects of credit as well. For instance, it could potentially increase the credit utilization ratio if other lines remain open and are lower in limit compared to the closed account, which can negatively impact the score. Although managing fewer credit lines can make financial management easier, that benefit does not directly influence the credit score like the age of accounts does.

A nuanced understanding of how various factors, such as account age and utilization ratios, contribute to overall credit health is critical for effective financial counseling.