NerdWallet did a study to see how the largest cities in the US ranked in terms of credit. There were a few interesting trends related to the cities with the highest ranking credit scores, such as the Midwest having the greatest scores, and southern residents having very poor scores. Unfortunately, it’s not practical to move across the country for a better score (and it obviously wouldn’t guarantee any changes). However, there was one influencing trend in the study that consumers do have control of: the average number of open credit cards.
Across the board, all of the highest ranking cities had a higher number of credit cards open, while the lowest ranking cities had less credit cards open. In fact, consumers in the top 20 cities had an average of 3.33 open credit cards, while on the other hand the bottom 20 cities had an average of 2.68 open credit cards.
Part of this big discrepancy is due to the credit utilization ratio. Part of your credit score is calculated by the amount of credit you are using. For example, if you have two credit cards, one with a $20,000 limit on which you owe $15,000 and another with a $20,000 limit on which you owe nothing; you are using approximately %38 percent of your aggregate limits on your revolving credit. If you did close one of the accounts, you utilization ratio would skyrocket to %75 because you have less credit available. Keeping an old card is a good idea if it has a high limit that can affect this ratio.
Another factor to consider is the average age of credit. Using credit responsibly for a long time reflects a trustworthy borrower, and a better score. So, the older the average age of your credit is, the better it is for your credit score. While closing an old card will not drop the positive information off your score right away, it can hurt scores down the line once it falls off.
It’s also a good idea to speak with a credit expert if you are unsure how your credit cards are effecting your score. This study didn’t cover all the factors that cause high credit, so be sure to stay tuned for more tips!